Hakan Falk wrote: >Robert, > >I do not really understand what you are saying. >
It's not your fault that I'm not communicating clearly! > Who are the enemies? > > Anyone who attempts to exert control over the US economy, even if that control consists of protecting their investments in bonds, dollars and US assets. In essence "everyone else" is the enemy. We are, in effect, taxing foreigners by the gradual degradation of our currency in order to sustain our spending, and there are a LOT of people over here who are quite content to keep doing this. >Who is responsible, if you have to do one or two devaluations, to adjust >your economy? > Mr. Nixon did this back in the 1970's, and by doing so initiated a round of inflation that benefitted property owners, as you've pointed out. Here is an excerpt from an online article that explains this. I've snipped it from the following page: http://www.tpmcafe.com/node/29686 "However, devaluation, fast or slow, almost never produces the effect of moving economic activity from non-tradeable to tradeable goods. Instead, as with the Argentine devaluation, or the devaluation that occurred earlier in Bush's term, it moves the country towards more protectionism. As the value of a currency drops, consumers continue to spend, but transfer money from the local economy, to exporting – deficits continue to rise, and investment in the home country falls. Or the home country proceeds to halt exports of materials far down the value chain, and attempts to add value and engage in import substitution. In effect converting inefficient non-tradeable parts of the economy to inefficient trading. The result is a loss of the advantages to trade – as work that could be done more efficiently elsewhere is done inside the devaluing country. Since labor prices have dropped, this lower value add strategy works. This is what weak currencies really do – by lowering the relative cost of labor, they make lower value add strategies more effective. Afterall, it isn' t the efficient non-tradeable production that goes first, it is the marginal non-tradeable production that will be shifted first. This is why devaluation only works if combined with some form of economic restructuring to radically shift incentives. Generally at the root of all overvalued currencies was an incentive to engage in the protected economy – often through excessive budget outlays, but just as often through corrupt or collusive market practices. For example, a large and unproductive war for the benefit of a few industries. Such restructuring is painful, as people who have skills and capital lose out – just ask American high tech workers, or Argentinians of any walk of life. This is why while devaluation – which hurts mainly foreigners at first, is often a popular step in lieu of restructuring. The problem of course is that most nations import oil. For nations trying to reign in consumption, this is not a problem – making oil more expensive acts as a luxury tax. For those with enough energy to support themselves, or nearly so, it is a burden, but a manageable one. For a nation like the US, which neither wishes to change its driving habits, nor wants to even begin restructuring, it is unlikely that difficult decisions will be made. On the contrary, the most recent action of the US government was to continue the red queen's race of cutting taxes on the wealthy here, so that they can stay even with the oil exporters that can hold dollars to prop up the US currency. Clearly the belief in Washington is that Reaganomics can be run a few more cycles, and damn the long term consequences. This is why devaluing to avoid a recession usually doesn't work, because it is the recession, with its enforced rationing, that is generally the trigger for restructuring in an economy. People in pain are more willing to make decisions that are painful, since they have come to understand that they cannot defer the pain, nor make it fall on someone else instead. Devaluation isn't an evil in itself, however, by itself, it generally produces more evil than good. Of more use is the ability to unpeg a currency and float it when it is pegged in a manner that distorts the economy, but this too has its perils. Countries unpegged from gold in the 1930's successful, if they had an export market and an internal economy in good order. However, the floating of currencies in 1972-73 merely turned inflation into another round of stagflation. Once again, the ability to shift production is required. Thus the current drive for "normalization" of currencies - which is to say dollar devaluation - is unlikely to do more than drive up the price of gasoline, and shift effort out of marginal service production in the US, leading to slower job creation, since marginal service jobs represent the bulk of jobs created, while the real deadweight non-tradeables - large houses - and the real sponges of US import - gas and consumer electronics - continue to spiral upwards. That's the problem - by itself, changing marginal behavior does not deal with the core of the problem, since each consumer slagged by the loss of a service job only reduces import pressure slightly, and in a regime of rising import prices, some other consumer with more income is happy to take up the slack. Instead there needs to be a fundamental change in incentives, and in this case that will mean, sooner or later, a change in the monetary basis of the US economy and the world currency order." > Who will be bombed and why, because I suppose that it >is not US that is the target? Why would US start a WWIII over a such >a simple issue as adjusting its economy. > > Are we talking about a simple adjustment, or something more fundamental? I have a sister who is a stock broker, and from listening to her and looking at the "freakonomics" perspective to which she and MANY other people ascribe, they are more than content to let the rest of the world pay for our excesses and use force, if necessary, to sustain the status quo. Yes, this is a short sighted solution, but I'm telling you that the vast majority of Americans don't give a rat's tail about the rest of the world. >I have only outlined what happens in an economic adjustment, which >is long overdue for US. Who are the rich that will lose and cause any >such actions as bombings etc. It is not the oil and energy industries >and it is not the property owners, both would gain. The other rich people, >does not have the clout and influence, to start a meaningless bombing >campaign. > >The devaluation will happen, because it is long overdue. I can not see >how it can be avoided. The mistake is that it has been avoided too long >and the final result is a major devaluation. Instead of two or three smaller >ones, with time to adjust between them. The result of bad politicians that >think more of themselves than the country. None wants to preside over a >unpopular but necessary action. > > And this is precisely why I believe no one will do anything. Congress and the administration seem to believe that by ignoring the problems, they'll simply go away. We're hearing about immigration reform and border security right now. Mr. Bush seems to think our economy is strong. There's no talk about what's happening to the dollar, except an occasional blurb about markets responding positively to the new nominee for Secretary of the Treasury. So let's pretend that Venezuela starts accepting the Euro for its oil. We'd have an instant "threat" to dollar domination and an instant target upon which to unleash our power. If you Europeans start holding us accountable for this nonsense, we'll threaten you as well. >US is much less an empire today, than it was 20-40 years ago. It might still >be seen as an evil empire in developing countries, where their corporations >drain them on their natural resources. US is not an empire, because it >have no colonies. Maybe it was a financial empire, but most of it is already >lost and it is much more balance today. It is only South America that still >have some reasons to be described as part of US financial empire. in the >old sense. They are also running the largest risk of US military >"interventions", >to secure US needs of energy and natural resources. Would however not >happen at once and it would be a big mistake, since it is not winnable >without local cooperation. US have de facto "occupied" South America for >a long time now and we are seeing the start of the end of the puppet regimes >that was the instrument. For sure, it will not work in middle east >and the Iraq >attempt will fail. > > I have no doubt that it will fail, sir! I don't deny the folly of the path I see the leadership in my country pursuing, but they seem bent on preparing for Armaggeddon and they have the means available to push the entire world to that place. robert luis rabello "The Edge of Justice" Adventure for Your Mind http://www.newadventure.ca Ranger Supercharger Project Page http://www.members.shaw.ca/rabello/ _______________________________________________ Biofuel mailing list Biofuel@sustainablelists.org http://sustainablelists.org/mailman/listinfo/biofuel_sustainablelists.org Biofuel at Journey to Forever: http://journeytoforever.org/biofuel.html Search the combined Biofuel and Biofuels-biz list archives (50,000 messages): http://www.mail-archive.com/biofuel@sustainablelists.org/
