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Doomsday Dick and the Plague of Frogs

by MIKE WHITNEY

Gold traders love Dick Cheney. Every time he opens his twisted lip and barks out another threat to Iran, the dollar takes a powder and gold futures shoot to the moon. Maybe that’s the way Cheney likes it. After all, he dumped about $25 million in euro-bonds before he took office. Judging by the way he and brother-Bush have flogged dollar, he must have doubled his investment by now.

The old greenback has dropped nearly 35% in the last 6 years while gold has just about tripled. In 2000 the dollar was a trim, sinewy pillar of strength. It entered the ring like a young Mohammed Ali; darting to and fro while pummeling his prey with quick laser-like blows that were barely visible. Now, the greenback plods along like a 60 year old Rocky Balboa, wheezing heavily and reeling with every punch; waiting for the one roundhouse that will leave him staring up from the canvas, spitting up broken teeth and blood.

The dollar’s in a heap o’ trouble and "Doomsday" Dick is doing his level-best to make sure that it hits the skids before he leaves office. Just yesterday the snappish Vice President said, "It would be a serious mistake if a nation like Iran were to become a nuclear power. Then he added ominously, "All options are still on the table."

That comment put the dollar on its backside and sent Tokyo gold futures to a 21 year high.

Good work, Dick.

At present, the rest of the world is wondering if dollar’s going to pull through without a nervous breakdown. Central banks in Europe, Japan, and China have increased their money supply and kept rates low in order to prop up the droopy greenback. But that won’t last. Eventually, they’ll all have to raise rates to slow inflation and stop equity bubbles from getting out of control. (The Chinese stock market rose by a whopping 140% in one year. They probably don’t like the prospect of a Dot.com-type meltdown like we had in the US.) Regrettably, once interest rates start to rise, the dollar will quickly slip from view leaving nothing but a trail of vapor behind.

It’s astonishing how cavalier Cheney and the gaggle of racketeers at the Federal Reserve have been regarding the dollar. After all, why kill the goose that lays the golden egg?

As the world’s "reserve currency" the fed can simply print out a couple trillion whenever it comes up short and bring back boatloads of sleek, Chinese manufactured goods or tankers weighed down with petroleum to power our boxcar-sized SUVs. Or, maybe, Bernanke would rather crank-out another $12 billion in crisp $100 bills, shrink-wrapped and loaded onto pallets and sent off to Iraq where they can vanish in the black hole of corporate malfeasance.

That’s not a problem as long as the world keeps accepting our "overdrawn" checks.

But what happens when the rest of the world sees that the "stewards of the global economic system" (that’s us) are nothing but a bunch of Texas yahoos, religious zealots, and war-mongering boneheads?

See, the funny thing about money is that it requires confidence in the provider that he will honor his part of the deal and operate in good faith. Otherwise, no one would dream of exchanging valuable resources and manufactured goods for silly, green tokens of credit-based fiat money with squiggly writing and funny looking men in powdered wigs on it.

We all expect money to have value, and yet, the Bush team continues to sabotage the currency with their unfunded tax cuts, their $9 per month war in Iraq, and their 35% expansion of the federal government. (Remember when Clinton said the "era of big government is over"?) The result of this craziness was thoroughly predictable; central banks are running for the exits.

Last Firday, the government reported that net capital inflows reversed from the requisite $70 billion to AN OUTFLOW OF $11 BILLION!

The current account deficit (which includes the trade deficit) is running at roughly $800 billion per year, which means that the US must attract about $70 billion per month of foreign investment (US Treasuries or securities) to compensate for America’s extravagant spending. When foreign investment stumbles, as it did in December, it puts downward pressure on the dollar.

So what does it all mean?

It means they don’t want our stinking greenbacks. And, if they don’t resume purchasing our debt (US Treasuries or securities) the dollar will join Rocky Balboa on the canvas peering out blankly at the klieg lights.

Just last week, the Royal Bank of Scotland conducted a survey which showed that Central Banks in Italy, Switzerland and Sweden have made "major adjustments" in their stockpiles of dollars. The cutbacks raise the fear that a stampede away from the dollar could begin at any time, triggering a global currency crisis of biblical proportions.

"The full faith and credit" of the US Dollar does not mean what it did 6 years ago. That’s a fact.

The Bush-Cheney-Federal Reserve axis believe they can keep this ponzi-scheme going by cornering the oil market (attacking Iran) and forcing the petroleum-thirsty world to accept our feeble banknotes. But that’s just nuts. The Chinese are already killing us by buying up oil and natural gas leasing rights around the world WITH OUR OWN DOLLARS!

We’re getting beat with our own stick.

It wasn’t supposed to work that way. We thought we were being clever by destroying the American labor movement and shipping our industry to China. We figured we could trounce the middle class at home while putting the "fear o’ god" in the Chinese with our "shock and awe" military that was supposed to be out of Iraq in 3 years at the most.

How’s that working out?

Now the housing-bubble albatross is dragging down millions of home owners while the maxed out American consumer is down to his last credit card. In other words, the $11 trillion of new debt that was cleverly engineered through Greenspan’s low interest rate bonanza is about to detonate and bring the whole, wretched tower of American debt crashing to earth.

The whole mess could have been avoided with responsible leadership. If Bush’s wasteful tax cuts had gone to the middle class they would have stimulated positive growth in the economy and reduced the widening wealth gap. If Greenspan had raised interest rates in 2001 it would have slowed down new home construction and circumvented the housing bubble. If Bush had negotiated with Saddam, he could have secured oil-leasing rights (which Saddam offered in the weeks before March 2003) without dragging the country to war.

Instead, the economy is facing disaster; the dollar is shaky, gold is soaring, personal savings rates are shrinking, margin debt is skyrocketing, foreign investment is drying up, home sales are plummeting, and Dick "Last throes" Cheney wants to expand the war to Iran.

All we’re missing is a "plague of frogs."

Cheney is still convinced he can pull off his whacko scheme to control Middle East oil and, thus, force the world to take worthless sheets of green scrip that’re backed up by $8.7 trillion of debt and wouldn’t even make good bird-cage liner.

It’s madness.

MIKE WHITNEY lives in Washington state. He can be reached at: fergiewhitney@msn.com

 

MIKE WHITNEY lives in Washington state. He is a contributor to Hopeless: Barack Obama and the Politics of Illusion (AK Press). Hopeless is also available in a Kindle edition. He can be reached at fergiewhitney@msn.com.

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