About time. Wake up & smell of coffee.

[jaguar]

The idea behind US policy at the moment is that a weak dollar will offset the deficit. It's a flawed idea. It'll work but as the article points out, the cost will be huge - sharp recession and the dollar losing it's status. The US 'recovery' so far is based on asset price bubbles and a very dangerous level of consumer spending, both factors that will make and downturn much harder and sharper as interest rates rise.

What happens to the euro depends on what happens with the EU which at the moment is the new constitutional treaty, if that all goes to shit it's an open game.

[tw]

Lets put some sound bytes to what Jaguar has posted. First an exact quote from Cheney in a senior level meeting titled "Economic Growth" in June 2002:

Reagan proved deficits don't matter.

Spend and spend more? Others versions are "pay now or pay later". Steal from Peter to pay Paul?

Why was Paul O'Neill (Sec of the Treasury) fired? He refused to go along with another money game - the second tax cut.

Companies that should be proclaiming serious losses have instead shorted their pension funds. It makes them look good now - in the hope that the economy will get better. Don't believe it. This is as good as it gets. Rediculously low interest rates are simply maintaining - not creating - jobs. Storm clouds overseas are growing ominous. For example, the central bank of China is said to have absorbed so many dollars (to protect their exports) that it is now 80% dollars. Sooner or later, they will have to dump that money - at the expense of your net worth. That is how economics works. A 40% drop in you net worth and income is how economic forces impose penalties for irresponsible fiscal activities. Why? Did Reagan really prove deficits don't matter - or is that an excuse to make them look good at the expense of your future?

Cheney and company discovered some real suckers - who forgot all the lessons of late 1960s and 1970s.

Anyone can mortgage a government when the people don't care. America said it is better to lie. Don't worry. Be happy. Sound bytes so that anti-Ameircans - people with ostrich mentalities - will support a mental midget president. So how will we pay for the attack on Iran? We refuse to admit how much we have already spent on Iraq. Those bills remain largely unpaid. Where will all this money come from? As always, the suckers always pay both big time and later.

These are the good times. How big is your cushion when world economic forces demand payment for all these past due bills.

Did you read Greenspan's last speech? They must be read slowly and carefully. He has been sounding a warning for some time in a hope to cushion the crash by easing us down. Number one problem he always points at - the George Jr wild spending sprees. Reality, only Democrats have displays fiscal responsibility. Republicans (except George Sr) have a bad habit of telling lies we believe.

[Troubleshooter]

www.goldline.com

[russotto]

The problem with the idea that the dollar's decline is deliberate policy is that it assumes US policymakers have a far greater level of control over the dollar than they really do. There are reliable ways to devalue currency, but if the US govt was taking those than core inflation would be a big problem, and it isn't.

I don't see the US recovery being a false one; rather the opposite, the period of stagnation following the recession has been artificially lengthened by exceptionally conservative investors and board members (many in those overlapping groups having been burned by the dot.com bust) and of course terrorism and Iraq. The fundamentals are there and the capital is there but the willingness to take risks has been absent. This is also a large part of what has kept employment down.

The Euro is too potentially unstable to replace the dollar at this point; the US government is far more stable than the EU, and that's the dollar's big asset.

BTW, the original article's claim that a decline in the dollar amounts to default on government debt is more than a bit unreasonable; if you're going to invest in foreign-currency-denominated debt, the risk of that currency falling vis-a-vis your own is a normal one. If the US was taking the easy way out of just printing money, you could call it something akin to dilution, but that's not the case.