Hey, it’s Daily Kos, so here’s your saltshaker to go with it. Still, it’s really scary stuff:
Chinese Lose Faith in Dollar — take the time to read the posts after this entry; they’re all rather good.
Seymour Hersh: “We’ve Been Taken Over by a Cult”
Soldiers returning from Iraq have to pay for meals at Walter Reed
Dollar Dump: Central Banks Shun US Assets
Here’s one specifically about Norquist.
I’m hesitant to yank my stocks, but I’m currently rethinking whether or not to put my tax return money into my IRA for my annual contribution as usual, or stuff it into my proverbial mattress.
Thoughts? Dan, Virus, Jason, you wanna weigh in on these?
I don’t think it’s time to pull everything from investment land quite yet. By the time it’s clear that you should, it would be too late anyway.
I’ll contend that Jane’s linkage tends toward the hysterical end of coverage, and should be taken with a big ol’ salt lick.
Now that’s not to say that I’m concerned about our current monetary policy. A nation cannot sustain an ongoing deficit of 6% of the GNP for any length of time. A lot of economic mucky mucks are concerned.
The architects of this situation are smart, and they geopolitical game that’s being played is something about which we can only speculate. To me, it feels like a big game of policy chicken: see who blinks first. China has no incentive to not peg the yuan to the dollar at this point in time.
(http://www.nytimes.com/reuters/business/business-markets-forex.html
“Concerns over the huge U.S. trade and budget deficits have contributed to a three-year decline in the greenback but the prospect of higher interest rates has driven the dollar higher against the euro so far in 2005.”
I think the US is trying to hobble the EU as a potential hyperpower with the current ‘strong dollar policy’, because China is still a only a developing threat to US economic hegemony.
http://www.nytimes.com/2005/01/27/business/worldbusiness/27econ.html
“With the dollar already trading at $1.30 to the euro – near the level of economic unacceptability for Europe – Mr. Roach said the United States could not rely on currency markets to right the imbalance between it and the Asian countries that finance American deficits by buying Treasury bills.”
Is it a dodgy situation? Certainly. I’m thinking that Greenspan and fiscally-minded GOP are going to start fighting on this one, which means that we’re going to see significant increases in interest rates in the near future: like the 6%-12% range. Devestating for growth, but I don’t think we’ll have much choice. Someone also made the point that paying back foreign debt is cheaper when interest rates are higher. I don’t think this is a case of the stupids. I think this is serving a longer-term goal and reading between the lines is required.
But the advice at the end of the first KOS column is sound advice no matter what the economic climate: eliminate consumer debt, spend less than you make, diversify investments, don’t buy in a bubble, etc. That’s not rocket science, that’s just common sense.
And as a final note – it’s almost comically funny to read this article in retrospect:
http://www.iie.com/publications/pb/pb01-7.htm
Almost.