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Gold no longer is the currency of the realm; paper is. The truth now is: “He who prints the money makes the rules”-- at least for the time being. Although gold is not used, the goals are the same: compel foreign countries to produce and subsidize the country with military superiority and control over the monetary printing presses.
Since printing paper money is nothing short of counterfeiting, the issuer of the international currency must always be the country with the military might to guarantee control over the system. This magnificent scheme seems the perfect system for obtaining perpetual wealth for the country that issues the de facto world currency. The one problem, however, is that such a system destroys the character of the counterfeiting nation’s people-- just as was the case when gold was the currency and it was obtained by conquering other nations. And this destroys the incentive to save and produce, while encouraging debt and runaway welfare.
The pressure at home to inflate the currency comes from the corporate welfare recipients, as well as those who demand handouts as compensation for their needs and perceived injuries by others. In both cases personal responsibility for one’s actions is rejected.
When paper money is rejected, or when gold runs out, wealth and political stability are lost. The country then must go from living beyond its means to living beneath its means, until the economic and political systems adjust to the new rules-- rules no longer written by those who ran the now defunct printing press.
In the short run, the issuer of a fiat reserve currency can accrue great economic benefits. In the long run, it poses a threat to the country issuing the world currency. In this case that’s the United States. As long as foreign countries take our dollars in return for real goods, we come out ahead. This is a benefit many in Congress fail to recognize, as they bash China for maintaining a positive trade balance with us. But this leads to a loss of manufacturing jobs to overseas markets, as we become more dependent on others and less self-sufficient. Foreign countries accumulate our dollars due to their high savings rates, and graciously loan them back to us at low interest rates to finance our excessive consumption.
It sounds like a great deal for everyone, except the time will come when our dollars-- due to their depreciation-- will be received less enthusiastically or even be rejected by foreign countries. That could create a whole new ballgame and force us to pay a price for living beyond our means and our production. The shift in sentiment regarding the dollar has already started, but the worst is yet to come.
A huge currency market jolt would occur if Saudi Arabia and the other Saudi Peninsula states abrogate the 1972 Nixon agreement to sell their oil only for US dollars. If they were to begin accepting other currency (Euros or Yuan, say), that would instantly drop the value of the dollar on the currency market, as other nations would not have to buy dollars to buy oil.
Arguably, the dollar would survive, but markets are as much about shocks and speculation and perceived value as they are about real supply and demand. And that's a real reason why the vote to allow US citizens to sue Saudi Arabia could backfire.
Tariffs are pretty much the oldest form of government economic influence on trade since the invention of war. They are so simple and straightforward--a child can do the math.
One would wonder why they aren't used all the time. One would wonder why other presidents didn't use them (there were other presidents before Obama, you know).
At least one ought to wonder.
Follow the money. It's all about the Benjamins.
What soon became clear to US Treasury and Federal Reserve circles after 1971, was that they could exert more global influence via debt, US Treasury debt, than they ever did by running trade surpluses. One man's debt is the other's credit. Because all key commodities, above all, oil, were traded globally in dollars, demand for dollars would continue, even if the US created more dollars than its own economy justified.
Soon, its trade partners held so many dollars that they feared to create a dollar crisis. Instead, they systematically inflated, and actually weakened their own economies to support the Dollar System
What is little understood, is how the role of US trade deficits and the Dollar System are connected. The United States has followed a deliberate policy of trade deficits and budget deficits for most of the past "FIVE" decades, so-called benign neglect, in effect, to lock the rest of the world into dependence on a US money system. So long as the world accepts US dollars as money value, the US enjoys unique advantage as the sole printer of those dollars. The trick is to get the world to accept. The history of the past "50"
years is about how this was done, using WTO, IMF, and the World Bank
What has evolved is a mechanism more effective than any the British Empire had with India and its colonies under the Gold Standard. So long as the US is the sole military superpower, the world will continue to accept inflated US dollars as payment for its goods. Developing countries like Argentina or Congo or Zambia are forced to get dollars to get the IMF seal of approval. Industrial trading nations are forced to earn dollars to defend their own currencies. The total effect of US financial and political and trade policy has been to maintain the unique role of the dollar in the world economy.
But debt must be repaid you say? Does it ever? The central banks just keep buying new debt, rolling the old debts over. The debts of the USA are the assets of the rest of the world, the basis of their credit systems!
The second key to the Dollar System deals with poorer debtor countries. Here the US influence is strategic in the key multilateral institutions of finance—World Bank and IMF, WTO. Entire countries like Argentina or Brazil or Indonesia are forced to devalue currencies relative to the dollar, privatize key state industries, cut subsidies, all to repay dollar debt, most often to private US banks. When they resist selling off their best assets, they are charged with being corrupt. The growth of offshore money centers in the Caribbean, a key part of the drug money cycle, is also a direct consequence of the decisions in Washington in the 1970's and after, to deregulate financial markets and banks. As long as the dollar is the global currency, the US gains, or at least its big banks.
This is a kind of Dollar Imperialism more slick than anything the British Empire even dreamed of. It is a part of the current America "Empire" debate no one mentions. Instead of the US investing in colonies like England to earn profits on the trade, the money comes from the client states into the US economy. The problem is that Washington has allowed this perverse system to get out of all control to the point today it threatens to bring the entire world to the point of collapse. Had the US instead promoted long-term policy of investing in the economic growth and self-sufficiency of countries like Argentina or Congo, rather than bleeding them in repayment of unpayable dollar debts, the world would look far less unstable today.
The problem is this process of creating debt, domestic and foreign, to keep the US economy going, has gathered so much momentum it risks destroying what remains of the US manufacturing and technology base.
It is caught in its own web: American jobs, hi-tech jobs as well as factory jobs, are vanishing permanently as US factories source to China, India or other cheap areas. If Washington pressures China and others to cut back exports they risk to kill the goose that lays golden dollar eggs. Who will buy that growing Government dollar debt? Private bond traders are desperately trying to sell their US bonds. Germany can only buy so much dollar debt, also Japan.
US economic hegemony in this distorted Dollar System increasingly depends on a rising rate of support from the rest of the world to sustain US debt levels. Like the old Sorcerers' Apprentice. But the point is past where this can be gotten easily. That is the real significance of the US shift to unilateralism and military threats as foreign policy. Europe can no longer be given a piece of the Third World debt pie as in the 1980's. Japan has to cough up even more, as does China now.
Even ordinary Americans have to give up their pension promises. If the Dollar System is to remain hegemonic, it must find major new sources of support. That spells likely destabilization and wars for the rest of the world.
As Henry Kissinger once noted, "Who controls the food supply controls the people; who controls the energy can control whole continents; who controls money can control the world."
Smoot–Hawley Tariff
Threats of retaliation began long before the bill was enacted into law in June 1930. As it passed the House of Representatives in May 1929, boycotts broke out and foreign governments moved to increase rates against American products.
The dutiable tariff level under the act was the highest in the U.S. in 100 years. The great majority of economists then and ever since view the Act, and the ensuing retaliatory tariffs by America's trading partners, as responsible for reducing American exports and imports by more than half.
Unemployment was at 8% in 1930 when the Smoot–Hawley tariff was passed, but the new law failed to lower it. The rate jumped to 16% in 1931, and 25% in 1932-33. U.S. imports decreased 66% from $4.4 billion (1929) to $1.5 billion (1933), and exports decreased 61% from $5.4 billion to $2.1 billion. Thus, net exports declined from $1 billion to $600 million
According to government statistics, U.S. imports from Europe decreased from a 1929 high of $1,334 billion to just $390 million during 1932, while U.S. exports to Europe decreased from $2,341 billion in 1929 to $784 million in 1932. Overall, world trade decreased by some 66% between 1929 and 1934
Don't let me spoil it for you. But do you know what comes next when economies fail, countries cut each other off, and blame their internal problems on outside forces?
I said before NAFTA and GATT. Were we not using tariffs up until the mid 90s? I mean no offense, but throwing out stats from 1929 seems pointless.
Mr. Sporty and Kode, I will try to give you both an answer here. Our main problem we face is too much debt. We are all getting poorer as our debt goes up. We can inflate away our debt - but, as we do this, we are also inflating away our currency. See what happened in Rome when the currency was inflated away.
We've already had our ECONOMIC EXPANSION - 1983-2001. That's when we had real growth, not the fake growth that the Fed engineered with trying to fill a full cup and created our current FLOOD. No real growth has been possible since 2001 and all fancy FED plans to restart real economic growth have failed. As of today, we are still on life support, stalling, postponing the inevitable, postponing something that can't be avoided, postponing Deflation and another Great Depression. We are fighting the war that we already have lost once. So why not embrace it instead of trying to win the war that can't be won. Mother Nature will never allow us to win this war, you all just remember this. This war against Deflation and Depression can't be won this time in history no matter how many QE programs you create and how much money you print. Idiots at the FED know that, but they are afraid for their own existence now since CENTRAL BANKS ALL OVER THE WORLD HAVE forced everyone to be 'in the market'. You see Central Banks now have to make sure the markets are safe and can't let this bubble implode. By doing this they are setting us up for a MOTHER OF ALL IMPLOSIONS. They are taking us straight to the slaughterhouse!!!!
So, no quick fixes. I know this is frustrating for the wanna-be problem-solvers in the audience here . During the BUSINESS CYCLE, Man triumphs over Nature. During the REST OR NON-GROWTH CYCLE, Nature triumphs over Man. No matter what you do, who the President is, growth is not possible unless we allow Deflation, and in our case now Depression to destroy our bad debts. There is a reason DEFLATION has been build in our economic system. Those who try to resist this process will always fail at the end.
Sorry, but I'd argue that our most recent period of economic expansion was post WWII, 1950's to early 80's, when globalization of manufacturing began taking off in the pacific rim. Of course that period is the heart of the boomer generation who are now beginning to leave the workforce. The debt problem is the result of declining revenues from a shrinking workforce and declining wages, and an increase in government spending. The only way to turn it around is to get spending under control and increase tax revenues, that doesn't have to mean tax increases, just getting higher wages, more tax payers on the tax roles, and fewer tax loopholes.
I'd also argue whether deflation is the only solution, we really haven't experience runaway inflation since the 80's, overall, wages have been in decline but prices in commodities has been pretty flat. The problem I see in the current economy of the past 8 to 10 years has been the combination of manipulation of money towards the top of the pyramid, and ineffective controls by congress. The oligarchs are hoarding money and not keeping it in circulation, they don't want the risk, that's a global problem. There is no stomach in Congress to increase tax levels on them to force them to either spend it or lose it, are they paid off? So, it can be self correcting, no spending, no growth.
To the OP's question of jobs, to a large degree, the work force is changing, large employers are a liability in this country largely due to medical insurance, that's where we differ from almost all other countries. But this has spurred more smaller business development, mostly high tech, which is actually easier to pull off in the USA. The thing which Trump misses with the immigration issue, why do all these people come here? He thinks it's for nefarious reasons, I disagree, it's because there is still more economic opportunity here than most other countries. So, you have to look for opportunity, which I admit was easier 30-40 years ago, but it's still there. Both of my son's chose not to go to college as I did, they are both in the trades and making a good living even though the economy is down.
The only "good job" other than MD is plumber. When the toilet backs up, you will call for help.
Good jobs will not come back to the USA despite Mr. Trump's promises. Why would they? Why would any company take a chance on dealing with unions? I've nothing against unions mind you, but if I owned a business and was fighting a union then Mexico would look very appealing.
The sad truth is, most people are not smart enough for engineering or very high tech skills. Just the way it is. Therefore, the factory jobs are needed to gainfully employ people like me who still has no idea how x + y = z.
The nation is in an employment crisis. The pie has been cut too many times and there are still too many people waiting for their slice. Ain't going to happen.
And the companies will just hire people from abroad because they will work for less than the American counterpart.
I don't think they'll ever come back either. Trump or no Trump, "the damage has been done" w/ all the high taxes and leftism over the years, it is very expensive to do business here now. Just look at Obamacare as the most recent example, it turned us into a part-time low wage economy.
Speaking realistically, in order to "entice" these various big companies into coming back to USA you would have to convince Americans to accept a $2/hour wage or lower.... and that's simply not gonna happen because no one can survive on $2/hour in this country w/ average rents at $1k+ a month. The cost of living would have to come down to make $2/hour life possible, but the big companies and landlord types are far too greedy to ever accept that either or lower their prices.
I think our biggest problem as Americans, but especially the leftists, is that we "want it all". Republican/right wing types are no where near as bad and are generally more common sense/down-to-earth, but they too sometimes get caught up in these leftist-style misnomers.
We want lots of factories, but leftists at the same time want to "protect the environment" with regulations. We want more money in our pockets, but leftists consistently push for higher tax rates on average working folks. We want stronger communities/intact families, but leftists consistently push for and legislate anti-family policies, promote single moms/welfare, feminism, etc.
See what i mean? You just CAN'T have "both" in many cases. Countries like China for example don't give a crap about leftist ideas like "the environment" and "welfare", and i think their tax rate is like a measly 10% or something?
So is it any wonder why so many companies leave us and go elsewhere? I'm not surprised when looking at the side-by-side comparison. If i was a company worth anything, i'd probably do the same thing.
Understand this and you will be free. Your on your own. There's huge opportunity in network marketing with financial services or in the financial services industry as a whole. Learn to sell and write your own income.
Bash the world of sales and keep going as planned. Times have changed and the job market as once knocked is never coming back. It's a new world now with many competitors for that glorified job people want. Your on your own.
I said before NAFTA and GATT. Were we not using tariffs up until the mid 90s? I mean no offense, but throwing out stats from 1929 seems pointless.
Of course.
You understand the mis-match on this?
It is you. YOU. You are displaying something called "Critical Thinking Skills."
Critical Thinking Skills are not about criticizing something but rather the ability to ask, "Is This (or That) True?"
History of the US Tariff is much deeper, longer, than the packaged 8th Grade (yes it is 8th Grade, I checked) chant of Hawley-Smoot.
If you want the slightly deeper analysis it is this:
In times of Trade Surplus (when a Net Exporter) Tariffs may harm your local economy. In times of Trade Losses (the 1980s through now), Tariffs help your local economy.
1920 and 1930s the US was Net Exporter, so it was not wise to raise the already existing Tariffs (which Hawley-Smoot did).
Since now the US is a Net Importer, it would be wise to have some reasonable Tariffs.
Short version is Reaganomics and Free Trade is for Idiotic for US. But since folks have been conditioned since 8th Grade and on, and have low Critical Thinking Skills, you may find they cannot comprehend new information or things that conflict with their existing beliefs.
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. During the BUSINESS CYCLE, Man triumphs over Nature. During the REST OR NON-GROWTH CYCLE, Nature triumphs over Man. No matter what you do, who the President is, growth is not possible unless we allow Deflation, and in our case now Depression to destroy our bad debts. There is a reason DEFLATION has been build in our economic system. Those who try to resist this process will always fail at the end.
