The fall of the almighty dollar

I came accross this link that someone posted on Soxtalk. It is interesting, except it is complete garbage.
http://feeds.bignewsnetwork.com/?sid=191c7b9599f51f92


Why are economists avoiding the obvious? The US government wants a weaker dollar to save American jobs and exports. The US keeps getting unduely screwed by the WTO. The US isn't allowed to protect its markets from activities that would get US companies drug into antitrust courts. Forgien governments subsidize things like steel, which allows them to sell below cost, yet the WTO rules against the US for protecting their industries. The WTO keeps ruling against the US in these type of suits, which means the US has to protect its economy in another way. What they are doing now is devaluing the dollar in order to bring the unfair cost of exports into a reasonable level. How well is this strategy serving America? Right now many of our key industries are beginning to recover from their unfair attacks.

Once again using the example of steel, huge consolidation and many bankruptcies took place within this industry. Many people lost a lifetime worth of work and pensions, all because of these predatory practices. But the WTO deemed this as immaterial in reference to the protective tariffs that the US tried to use to save American jobs and industry. Now the US has moved the dollar in an amount relative to the tariffs that they wanted in the first place. Now all of the worlds imports an subject to what amounts to an artificial tariff on anything that they import to the US. They either have to drop their prices in their home currency to a respective level to match the fall in the dollar, guarenteeing a lose in revenue- or leave their prices the same, and have less people in the US buy their goods because they are now that much more expensive than their relative US competition.

The whole song and dance about savings rates, and debt spending is also misleading. If you look at exchange rates for a currency like the Yen that has been around, and also at debt levels in relation to GDP, and you will see that the mid 80's saw much higher debt%'s and much higher values in what the Yen was based at vs the dollar. The whole idea that we owe more money so the dollar is collapsing is ludacris. The writer seems to forget that the whole economy is much, much larger than it was at his reference points. If you have more money, you can spend more money, seems to be a basic lesson to me. Once again, the percentage of the debt vs GDP is lower now than in the mid 80's, yet the dollar held strong against the yen, which was then considered to be the dollars main rival. The dollar didn't devalue against the Yen until the late 80's, which happened debt/GDP% was crashing. Kinda puts someholes in the authors theory IMO.

The other thing that the author seems to forget was the ending of the gold standard in the 70's, and the oil shock that was going on. When the gold standard ended it meant that the dollar had no guaranteed value anymore. Prior to the 70's the dollar could be traded for a dollars worth of silver and gold, which was guaranteed to be on hand, by the US mint. When the gold standard ended, it was siezed upon by conspiritalists, who figured that this meant the dollar would collapse vs the rest of the world, because now its only value is what relative to what confidence people have in the dollar.

And as for the stagflation of the 70's people were also dumping the dollar because oil prices had just murdered the American economy. Fuel charges went up 10 fold at the pump over the course of of a few years. Prices exploded, while the economy tumbled. Stocks collapsed at the sametime. The American economy was way overvalued because of this stuff, and the dollar collapsed because of it. It had nothing to do with how many dollars were in circulation, that's just ridiculous.

And as for the Chinese, that is ridiculous as well. Long ago the Chinese pegged their Yuan to the value of the dollar, and took whatever artificial means it needed to support those levels. For a decade at least the Yuan has been extremely overvalued, that has been well reported. About a year ago, the US government asked the Chinese to remove the peg, and let the Yuan float, like all of the rest of the worlds major economics powers let their currencies float. The Chinese refused. Now that they American dollar has been artificially pushed down again, the Chinese are forced to take action in order to maintain the value of their own currency, because of its artificial valuations. The Chinese are subscribing to an opposite theory trying to maintain a strong Yuan, as they have been, as they have locked out forgein competition, so they have no consequenses for having an artificially strong Yuan.

This guy really needs to go back and review his history a little bit in relation to his macro classes.