I have traveled outside of the United States my entire life. Every passport that I have ever had, has required additional pages for entry stamps and visas. I have also lived twice outside in the United States. First I lived in Dublin, Ireland in 1997, and then I moved to Rio de Janeiro, Brazil in 2003. As I have traveled throughout the world, I meet with many other world travelers and all of us agree. The dollar has gone in the toilet.
When I was in Ireland in 1997, the dollar was the envy of the world. That was back before the Euro, but the dollar was significantly stronger than the Irish pound and the British sterling. As I recall, it was like 1.4 British sterling to the dollar, and 1.3 Irish pounds to the dollar.
Better yet, when I purchased my apartment in Rio de Janeiro, the dollar was close to 3 Brazilian reals to the dollar. It is a great great feeling when you are the owner of such a strong currency. When you travel internationally, everything seems cheaper. It made me feel very proud to be an American and all that it means.
But now, in such a short period of time, the dollar has gone from being the envy of the world to one of the weakest. To be clear, the dollar is now a lot weaker than the British Pound and the Euro. More importantly to me personally, the dollar has fallen close to 50% against the Brazilian real in the last 8 years.
The root of this problem is one and only one thing. The Federal Reserve. Just to be clear, the Federal Reserve is total bullshit because it is not federal nor is it reserve. It was invented in 1913, and given its name to give it an air of importance but let’s be clear. The Federal Reserve controls the American money supply and the dollar, but it has no direct reporting back to the federal government. Furthermore, they hold no reserves. In the past twenty years, there have been two retards running the Fed, Alan Greenspan and Ben Bernanke. In that time, they have managed to ruin the country and destroy the dollar.
Let me try and explain. First, let’s start with the basics. America is the greatest society that ever existed on the face of the planet. American innovation has driven the world for the last 150 years. The list is staggering but I’ll name a few. The automobile, the telephone, the radio, the airplane, the copy machine, the motion picture industry, the camera, the computer, the internet. These are the technologies that improve the productivity of society and the quality of all our lives. Not just in America but for the entire world. Then of course, we won both World War 1 and World War 2. For well over 100 years, the United States could do no wrong! And that is why the dollar has been so strong. The dollar represents the greatest country in the world.
Then Alan Greenspan decides sometime after 9/11 that he was God. He started printing money and dumping dollars on the world. (Note: Grreenspan did not seek nor did he need Bush or Congress’s approval to do this, he just did it.) This drove down interest rates and made the entire housing bubble possible. This stupidity also created our current economic mess. The news media keep referring to our economic situation as the worst since the Great Depression. Here’s the problem. The Great Depression is over, and our current situation is not. It can still get a lot worse, and my bet is that it will.
One of the reasons why I am soooo frustrated is that no progress is being made to fix this problem. Obama promised Hope and Change but when it comes to this issue, we are getting exactly the same. To be clear, the same people that advised Bush are advising Obama. Not one change has been made. Furthermore, the Republicans want to blame the Democrats, and the Democrats want to blame the Republicans. They are so busy bickering that they cannot work together to fight the largest threat to the American way of life. That would be Ben Bernanke and the Fed.
Back to basic economics. The problem with the American economy is that the Fed has been printing dollars out of thin air. Imagine in your mind, a magic printing press that just prints dollars whenever Bernanke snaps his fingers. Whenever our government goes into debt which it has a strong propensity to do, then rather than borrow money the Fed instead just prints money out of thin air. When the Fed does this, it has a broad impact on all of us. Here are the impacts:
- Artificially low interest rates. For the people that like to save money, it hurts us a alot. We now need to save even more money to make the same interest. This also helps Wall Street, because if you want to make a decent return on your savings, then you need to take the money out of your savings account and fork it to a Wall Street brokerage firm. This of course makes stocks go up and exposes your savings to much higher risk.
- Inflation. When the Fed prints money out of nothing, then it puts upward pressure on prices. All prices. In addition, the American government has undergone a consistent program to remove things from the inflation index often called the Consumer Price Index. For example things like health care costs and energy prices are excluded from the CPI. But it is not hard to see inflation all around us. Just keep price of the foods that you buy on a regular basis and you can’t help but notice that prices are going up. If the Fed did not do this, inflation would be under control.
- Weaker dollar. A weak dollar impacts me more than most since I live in a foreign country. But a weak dollar impacts every American of every race, sex and age. A weaker dollar makes the price of all American imports go up. America’s biggest import is oil and the weak dollar makes it go up. Let’s not forget that oil is also the needed to make plastics and all those goods rise in cost as well. More on this later. But suffice it to say that all of our imported goods get more expensive.
- Speculation. When interest rates go to zero, then money is cheap. At least for the banks that is. So one thing that banks now do is speculate on commodoties. The price of gasoline at the pump is rising not because of supply/demand imbalance but because of massive speculation. It is estimated that over 80% of the oil trading volume is related to speculation rather than use for airplanes, cars, and air conditioning. Oil is the most obvious speculation but the speculation is for all major commodoties such as wheat, sugar, live stock and so on.
Perhaps the thing that pisses me off most is that I am sure that the reason for the current economic collapse is Greenspan and Bernanke. It is NOT Obama and it is NOT Bush. We as a country are blaming the wrong people. The reality is that Greenspan pushed interest so low, and it resulted in a massive misallocation or resources into the housing industry. This is social engineering at its worst. Cheap money also enabled the Iraq War and tons of other BS both Republican and Democrat. Then of course, because of this misallocation of resources, the Federal government had to bail out the very banks that created the mess. Talk about a double whammy.
So I am FED up. Americans want jobs. The reason that we have poor employment has to do with the Feds pandering to Wall Street rather than to the needs of the American people. I have blogged before that Wall Street and the Dow Jones are not a proxy for the economy as a whole. No, far from it, and it is more evident now than ever before.