ahem...you're forgetting a few small, but important details here. it is true that a strong dollar is a disadvantage for the manufacturing sector, and US based global firms. but that's about all there is to it, in terms of disadvantages. what is far more important is that the mountain of dollars in foreign hands isn't dumped - there's the biggest current account deficit in human history that needs to be financed after all. and it's getting close to reaching 5% of GDP, a level where your average South East Asian nation would see its markets and economy implode due to flight of speculative capital.
the other little detail is that US money supply growth is by FAR the fastest of any industrialized nation. M3 will expand by a cool trillion this year if the current pace is kept up. the strong dollar allows the symptoms of this huge monetary inflation (i.e. rising prices) to be exported. behind this expansion in the money supply is a private sector credit bubble that requires constant aggressive Fed accommodation to keep it from imploding. to illustrate this with a few numbers, i quote from a recent Noland article:
<<During the past three years (1998 through 2000), total net U.S. non-federal (including financial) credit market borrowings increased $6.1 trillion, or $2.05 trillion annually. This compares to $8.6 trillion, or an average of less than $1.1 trillion annually during the previous eight years (1990-97). Since 1998, non-federal borrowings (excluding financial sector) averaged $1.2 trillion per year, compared to $456 billion annually over the previous eight years. Corporations (non-financial) borrowed a stunning $1.35 trillion over three years ($449 billion annually), compared to $886 billion ($111 billion annually) during the preceding eight years. Three-year financial sector borrowings surged almost $3 trillion, or almost $1 trillion annually. This compares to about $3 trillion, or $377 billion annually, between 1990 and 1997. Total mortgage borrowings increased $1.7 trillion between 1998 and year-2000 ($576 billion annually), compared to $1.7 trillion ($214 billion annually) over the preceding eight years. During the eight years ended 1997, broad money supply (M3) increased $1.343 trillion, or an average annual increase of $168 billion. During the next three years, broad money has surged a staggering $1.736 trillion, or at an annualized rate of $579 billion. So far this year, broad money has increased a staggering $299 billion. Money supply is on pace (almost 13% annualized growth) for an unprecedented expansion this year of more than $900 billion. The net year-2000 increase in household sector borrowings of $573 billion was up 70% from 1997, while net corporate (non-financial) borrowings last year of $447 billion were 68% above 1997 borrowings.>>
if this doesn't alarm you, i don't know what will. true, no pure gold standard exists anywhere right now, which is also the reason why the above excesses can be perpetrated. but rest assured, the bill will be presented, and you're right that we're in this all together, because we all, i.e. the whole world, will pay for it. |
