More from Heinz
Date: Fri Aug 13 2004 11:24
trotsky (strat) ID#377387:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
note: the basic laws of economics are immutable. they don't depend on externalities like the size of one's military machine.
to illustrate this argument, let's say China decides to dump its dollar reserves and buy gold and euros instead. in what way could this be ameliorated by the military? can one bomb China back into the dollar camp?
similarly, the 'reserve currency' status is a potentially great danger in the long term, even though it's a short term boon. this is illustrated by the former British Empire's pound, which inhabited the 'reserve currency' status prior to the dollar. the demise of the pound eventually hastened the demise of the empire.
the dollar enjoys the reserve currency status only as long as foreign creditors believe their claims can be cashed in.
granted, this belief is not in immediate danger. but with foreign dollar claims piling up at frightening speed, the day the con game ends draws closer and closer.
Date: Fri Aug 13 2004 11:00
trotsky (cjk) ID#377387:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
"Exports had the biggest decline since September 2000, suggesting that other economies aren't expanding as rapidly."
this is a misintepretation. since it is all done on credit, it only means that the domestic US credit bubble has been expanding very rapidly. exchanges of nothing for something are not wealth-creating activities. they consume wealth.
Date: Fri Aug 13 2004 10:53
trotsky (Gourmet Dan, 8:44) ID#377387:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
"we own these fools"
that would be nice, but it's exactly the other way around. the 'fools' are the ones who have the production facilities, while you only have depreciating paper to offer. no doubt the creditors can, and probably will, eventually be stiffed on their dollar claims, but they'll still own the production facilities.
they will simply have to alter their m.o., from their mercantilist export orientation toward domestic consumption of their output.
note that your capacity to import their output depends entirely on whether they're prepared to lend you the money to do so. once they stop lending the money, the printing press mojo stops working, since the paper then won't buy anything anymore.
just to clear up the confusion as to who owns whom. |
