U.S. Dollar: No Upside to Deceit and Betrayal

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Through decades of economic turmoil, there's one thing we've been able to rely on--when the U.S. dollar weakens, an endless herd of analysts start mooing the same refrain: 'A falling dollar is actually good. A falling dollar has an upside. A falling dollar helps American business to compete and export.'

The moos often accompany self-satisfied expressions of self-perceived clever inventiveness. Well yes, good job, it appears you've re-invented the brainless clich'. We might wish that it got re-invented a little less often.

The lavish immorality in this presumption of a right to arbitrarily squeeze the material life out of some people in order to supposedly invigorate a more important class should be impossible to miss, but under this view, it's only what suits policy that counts.

Should government try to let people know how much 'good' they intend to do with the U.S. dollar? No, for if you let people know, they might try to adjust and undercut all that goodness. Let them guess what the trial balloons, jawboning, Fed Speak, and punchbowlonomics might mean for their insignificant lives.

If we do correctly guess what the real intentions of our government are, we're not home free yet--our forecast still has to correct for the level of awfulness of their forecast. If the government forecasts behind the hidden intentions are only going to be really, really bad, then we might want to try to hang on to that job or career or small business to ride out the storm and await a recovery, but if it's going to cross over the overseas laughter threshold, then maybe we should cash in and walk away (though I'm not sure where we're walking away to--Second Life, maybe).

In popular wisdom at the moment, the analysis is simple enough. In one of those odd coincidences, everything on the other side of the U.S. dollar is in a bubble--dollar over here, an endless variety of bubbles over there--like the way that you might coincidentally drown if you chain yourself to a transmission, jump off a bridge, and start breathing water instead of air.

That word bubble is an evocative, captivating word. Everyone's taking to it. If someone had said a decade ago that the word bubble in its financial sense would become common and debated, I'd have taken that as hopeful--perhaps an important advance for the cause of reason. Hallelujah! We won't get fooled again.

So far though, it's just another chance to witness how easily power and corruption can absorb, dilute and blandify. The vocabulary of dissent is effortlessly gutted, ingested, fractionated, purged of its plot and momentum, and released with a pat on the head.

The apparent silver lining of a world record credit collapse--the Eureka ! that should easily slip its arm around the waist of that Hallelujah! to march with incontrovertible consilience to monetary and banking reform, is shot in its cocooning head and starts instead to babble that there's plenty of blame to go around, and the important thing now is to move forward (where moving forward means doing the same). 'Bubble' goes mainstream as just a vague term for something that whimsically and for no particular reason has gotten overdone. Soon it will be used to describe overeating at cheap restaurant buffets. A new moo joins the chorus. Apparently, we might get fooled again.

We may evolve a new word to reflect the old useful meaning of bubble, but if we're cynical now--and I don't see why not, since they took our silver lining and shot our cocoonish head--then this new meaningful term will be absorbed in its turn. Sort of like the way 'liberal' used to mean about the opposite of what it does now, and there's evidence of diminution of 'libertarian' in its turn (so that probably libertarian will someday mean a person with an unwavering belief that the Ruling Committee should always provide an opportunity for a televised courtesy vote by the ceremonial Congress).

Bubbles (the actual financial kind, not restaurant buffet indigestion) need loose money. Greed, and the flooding of systemic flaws in the pursuit of greed, come on top of the money and credit creation, as secondary causes.

Although the primary cause is always the same, there can be variation in the idea behind the loose money, the excuse that's supposed to make it different this time.

The major theme behind the loose money in America , the part that made us comfortable with engineering our own demise, was a notion that the U.S. dollar was indeed backed by something--an eternally and automatically superior U.S. economy. The U.S. may stumble, but it's always a powerhouse, it's always creative, it always finds the path to wealth, and the U.S. dollar's preeminence is a natural law (and from the American politician's point of view, a natural and fortunate right). With this behind the buck, the U.S. could, it seemed, manipulate its paper forever for our own and even (if your glasses are rosed to opacity, and your glass always one hundred and one hundredths full) for the world's advantage too.

No class of politicians, particularly American politicians, could resist abusing such a misperception to the point of total collapse.

It's been a long, interesting ride, full of misdirection and dazzling multi-generation long secondary effects. Offshoring, for example, the loss of U.S. manufacturing jobs to 'free trade' (a meaningless concept in the face of central bank manipulations), has been more an enormously overvalued U.S. dollar effect than a 'new economy' of finance and services with clever policy engineers to serve and finance them. (At the Battle of Gettysburg, one of the commanding Union officers made an odd choice of open ground out in a peach orchard. Union General Hancock was reported to say on observing the troop deployment by the officer, 'Wait awhile--he'll come tumbling back.' A similar comment seems a good description of those offshored American jobs. The reality of a drastically cheaper U.S. dollar will change the perception of the ground, by balance sheet bloodletting if necessary. As at Gettysburg , 'tumbling back' describes a more than painful process, and not all will be able to make it through the tumble.)

With 'confidence' disequilibrium can take its time winding up the spring. For almost 40 years (if just for fun we choose the U.S. closing of the gold window as our starting block), folks inside and outside of the U.S. fought for their place in line to be manipulated by and for Yankee dollars, but just like you can't adjust the dosage of medications to attain immortality, the manipulation and the manipulatee are only in an at first indeterminate dance that must end with a victory for reality.

Anything in the tired bag of U.S. monetary tricks will eventually be met with jeers, and not just for Treasury Secretary Geithner. Maybe that's the silver lining--a chance to see a few of the bastards chastened, even though there's a long line of new bastards vying for their chance to be in the right place at the right time when the economy can't possibly be beaten down anymore.

That dollar-betrayal angle to the crisis I believe tells us that the ultimate point of beaten downness isn't here quite yet, and those looking for a bottom of the crisis or a flattening out of the decline are unlikely to get much while there's even a whiff of 'confidence' around. As the title of this piece implies, we won't be able to have a recovery until the betrayal stops, or at least resets. We need that final tumbling back that makes the majority look at the defects of our ground.

Until we see news stories about large numbers of destitute retirees, even many in the upper middle class who did the most meticulous and 'fool proof' planning based on the advice of the top 'experts,' and we see business after business, and entrepreneur after entrepreneur, and worker after worker, who had everything right to succeed except for the ability to forecast or handle how 'good' the U.S. dollar could get, and how savage the fluctuations that corrupt manipulators have brought on us could get, the bottom probably isn't here yet. A more likely timing for the bottom to show is after the last fatuous moron can no longer say, 'a low dollar is actually good' (or 'some inflation is actually good').

At the end of ' Alice in Wonderland,' Alice shouts, 'You're nothing but a pack of cards' and the dream breaks down.

A piece of paper can be more than a piece of paper. In theory at least, it can say or promise something. (How often, if ever, a promise in perpetuity is kept is a subject for another day, and if I don't get to address it then the future son of my unborn, unconceived, unplanned for daughter can take up this burden for me.)

The near universal glibness in current discussion of government committee U.S. dollar manipulation as simply the right of our betters, a vague blend of raw open ended seigniorage and policy tool, without any promise, supported or intended value, or really even utility for anyone except the policymakers, may be a sign that we're approaching our tumble, the tipping point when too many people say, 'you're nothing but a piece of paper.'

Then we may know that the dream can't be recovered, but that'd be O.K.--easier to start over on firm real ground, without all this papered up dead weight fantasy.

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Les Lafave's picture
Columns on STR: 14

Les Lafave works in the insurance industry.  The opinions in this column are his own.