Sleepycatz

Are We Screwed?

I’ve been meaning to write about all economic lunacy perpetrated by the Federal Reserve for sometime, but this quote from this weekend’s OPEC summit just floored me:

On Friday, Prince Saud Al-Faisal, Saudi Arabia’s foreign minister, warned that the dollar could “collapse” if the US currency was mentioned in the declaration.

His remarks – made in what was supposed to be a closed ministerial meeting – were accidentally broadcast to reporters.

Al-Faisal is stating that the dollar is is in such a precarious position that even mentioning that OPEC needs to consider the effects of a low dollar on its members could cause the currency’s collapse. This would lead to outright panic here in America, as well as many of the oil producing states, such as Saudi Arabia, which use dollars as the basic pricing mechanism for oil. Because of the fall in the dollar’s value –44% since the last OPEC meeting 7 years ago– a number of the oil states are calling for greater oil prices to offset the devaluation. This, of course, will result in deepening the nascent recession here at home –which will, no doubt, result in the Fed cutting baseline rates again, thus, causing greater devaluation of the dollar.

In other words, under current Fed policy, we’re screwed. The Fed, however, sees it differently. By cutting baseline rates they are funding speculative investing, and keeping the equities and option markets (artificially) high. The Fed seems to be counting on foreign interests to keep the dollar from collapsing. The belief, seems to be, is that China, which holds around $1 trillion in US bonds, and the oil states of OPEC cannot afford to see the US currency collapse, and will continue to invest in dollars. But this is a strategy of russian roulette. Eventually, these states will decide they can no longer afford the losses on the dollar and begin to reinvest elsewhere –China, earlier this year began selling off US bonds at an alarming rate.

Last week President Bush charged congressional Democrats with spending money like “a teenager with a new credit card.” This from a man whose administration shipped 360 tons of US dollars to Iraq with no accounting or oversite in place. This from a man who has presided over the greatest increase in national debt in US history; an in increase in spending which has had no positive effects for the majority of Americans. When Franklin Roosevelt and Lyndon Johnson borrowed, they did so to try to enrich the American people. This president has done so simply out of hubris, and has enriched only the wealthy. The American people have found their wages stagnated at levels lower then those 30 years ago. They have found themselves with crumbling infrastructure, a crumbling military, and an inept and crony filled regulatory landscape to protect them.

I don’t generally believe in grand conspiracy theories, but, if I did, I could easily see one here. Thanks to Bush’s tax cuts, and outrageous spending on a never ending war and ‘homeland security,’ coupled with the “spend it now” attitude of the Federal Reserve we find ourselves perilously close to an economic meltdown. When one looks around, one can easily see the ‘free market’ wolves waiting in the wings. They will cry out that the problem with the US is that it spends too much on social programs, like Medicare and Medicaid, and others; that government is too inefficient and we need to privatize more and let the markets run without restraints and regulations. The fact is, they will be responding to a crises of their own making.

This entry was posted by steve on Sunday, November 18th, 2007 at 6:39 pm and is filed under Signs of the End, Politics. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.