Gold traders love
Dick Cheney. Every time he opens his twisted lip and barks out another threat
to Iran, the dollar takes a powder and gold futures shoot to the moon.
Maybe that�s the way Cheney likes it. After all, he dumped about $25 million in
euro-bonds before he took office. Judging by the way he and brother Bush have
flogged dollar, he must have doubled his investment by now.
The old greenback
has dropped nearly 35 percent in the last six years while gold has just about
tripled. In 2000 the dollar was a trim, sinewy pillar of strength. It entered
the ring like a young Mohammed Ali; darting to and fro while pummeling his prey
with quick laser-like blows that were barely visible. Now, the
greenback plods along like a 60-year old Rocky Balboa, wheezing heavily and
reeling with every punch; waiting for the one roundhouse that will leave him
staring up from the canvas, spitting up broken teeth and blood.
The dollar�s in a
heap o� trouble and �Doomsday� Dick is doing his level best to make sure that
it hits the skids before he leaves office. Just yesterday the snappish vice
president said, �It would be a serious mistake if a nation like Iran were to
become a nuclear power. Then he added ominously, �All options are still on the
That comment put
the dollar on its backside and sent Tokyo gold futures to a 21-year high.
Good work, Dick.
At present, the
rest of the world is wondering if dollar�s going to pull through without a
nervous breakdown. Central banks in Europe, Japan, and China have
increased their money supply and kept rates low in order to prop up the droopy
greenback. But that won�t last. Eventually, they�ll all have to raise rates to
slow inflation and stop the equity bubbles from getting out of control. (The
Chinese stock market rose by a whopping 140 percent in one year. They probably
don�t like the prospect of a Dot.com-type meltdown such as we had in the US.)
Regrettably, once interest rates start to rise, the dollar will quickly slip
from view leaving nothing but a trail of vapor behind.
how cavalier Cheney and the gaggle of racketeers at the Federal Reserve have
been regarding the dollar. After all, why kill the goose that lays the golden
As the world�s �reserve
currency,� the fed can simply print out a couple trillion whenever it comes up
short and bring back boatloads of sleek, Chinese manufactured goods or tankers
weighed down with petroleum to power our boxcar-sized SUVs. Or, maybe, Bernanke
would rather crank-out another $12 billion in crisp $100 bills, shrink-wrapped
and loaded onto pallets and sent off to Iraq where they can vanish in the black
hole of corporate malfeasance.
That�s not a
problem as long as the world keeps accepting our �overdrawn� checks.
But what happens
when the rest of the world sees that the �stewards of the global economic
system� (that�s us) are nothing but a bunch of Texas yahoos, religious zealots,
and war-mongering boneheads?
See, the funny
thing about money is that it requires confidence in the provider that he will
honor his part of the deal and operate in good faith. Otherwise, no one would
dream of exchanging valuable resources and manufactured goods for silly, green
tokens of credit-based fiat money with squiggly writing and funny looking men
in powdered wigs on it.
We all expect money
to have value, and yet, the Bush team continues to sabotage the currency with
their unfunded tax cuts, their $9 billion per month war in Iraq, and their 35
percent expansion of the federal government. (Remember when Clinton said the �era
of big government is over�?) The result of this craziness was thoroughly
predictable; central banks are running for the exits.
Last Friday, the
government reported that net capital inflows reversed from the requisite $70
billion to AN OUTFLOW OF $11 BILLION!
The current account
deficit (which includes the trade deficit) is running at roughly $800 billion
per year, which means that the US must attract about $70 billion per month of
foreign investment in US Treasuries or securities to compensate for America�s
extravagant spending. When foreign investment stumbles, as it did in December,
it puts downward pressure on the dollar.
So what does it all
It means they don�t
want our stinking greenbacks. And, if they don�t resume purchasing our debt (US
Treasuries or securities), the dollar will join Rocky Balboa on the canvas
peering up blankly at the klieg lights.
Just last week, the
Royal Bank of Scotland conducted a survey which showed that central banks in
Italy, Switzerland and Sweden have made �major adjustments� in their stockpiles
of dollars. The cutbacks raise the fear that a stampede away from the dollar
could begin at any time, triggering a global currency crisis of biblical
�The full faith and
credit� of the US Dollar does not mean what it did six years ago. That�s a
Bush-Cheney-Federal Reserve axis believe they can keep this Ponzi scheme going
by cornering the oil market (attacking Iran) and forcing the petroleum-thirsty
world to accept our feeble banknotes. But that�s just nuts. The Chinese are
already killing us by buying up oil and natural gas leasing rights around the
world WITH OUR OWN DOLLARS!
We�re getting beat
with our own stick.
It wasn�t supposed
to work that way. We thought we were being clever by destroying the American
labor movement and shipping our industry to China. We figured we could trounce
the middle class at home while putting the �fear o� god� in the Chinese with
our �shock and awe� military that was supposed to be out of Iraq in three years
at the most.
How�s that working
housing-bubble albatross is dragging down millions of homeowners while the
maxed out American consumer is down to his last credit card. In other words,
the $11 trillion of new debt that was cleverly engineered through former
Federal Reserve Chairman Alan Greenspan�s low interest rate bonanza is about to
detonate and bring the whole, wretched tower of American debt crashing to
The whole mess
could have been avoided with responsible leadership. If Bush�s wasteful tax
cuts had gone to the middle class, they would have stimulated positive growth
in the economy and reduced the widening wealth gap. If Greenspan had raised interest
rates in 2001, it would have slowed down new home construction and circumvented
the housing bubble. If Bush had negotiated with Saddam, he could have secured
oil-leasing rights (which Saddam offered in the weeks before March 2003)
without dragging the country to war.
economy is facing disaster; the dollar is shaky, gold is soaring, personal
savings rates are shrinking, margin debt is skyrocketing, foreign investment is
drying up, home sales are plummeting, and Dick �Last throes� Cheney wants to
expand the war to Iran.
missing is a �plague of frogs.�
Cheney is still
convinced he can pull off his wacko scheme to control Middle East oil and,
thus, force the world to take worthless sheets of green scrip that are backed
by $8.7 trillion of debt and wouldn�t even make good birdcage liner.
Whitney lives in Washington state. He can be reached at: firstname.lastname@example.org.