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FRED
11-12-07, 04:05 PM
http://www.itulip.com/images/Sarkozydollars.jpg"We will heat our homes with your dollars!"

French President Nicolas Sarkozy and another rhyme of history.

It could have gone better. At the start of the new Presidential administration in 1969 at last a stylistic peer of the irascible French President Charles de Gaulle had appeared in the person of the new US President, Richard M. Nixon, or so it was hoped:
"Charles de Gaulle has not been an admirer of U.S. Presidents. According to Author Pierre Galante, he called Franklin Roosevelt "a false witness," Harry Truman "a merchant." Of Dwight Eisenhower, he said: "I am told that on the golf links he is better at putting than he is with the long shots. This does not surprise me." To De Gaulle, John Kennedy "had the style of a hairdresser's assistant—he combed his way through problems." Lyndon Johnson was like "a truck driver or a stevedore—or a legionnaire." Nixon and the general should strike it off fairly well. Both are direct, practical men, and De Gaulle showed characteristic prescience in granting Nixon a 40-minute interview in June 1967—at a time when De Gaulle would not have welcomed L.B.J. into the Foreign Legion. De Gaulle respects a tough adversary, and Nixon has been advised to be polite but firm."

A VOYAGE OF REDISCOVERY AND RECONCILIATION, TIME Magazine, Feb. 28, 1969 (http://www.time.com/time/magazine/article/0,9171,900672-9,00.html)
Alas, De Gaulle's inflammatory words and deeds on monetary matters rendered this promising partnership dead on arrival of Nixon to the Whitehouse:
Perhaps never before had a chief of state launched such an open assault on the monetary power of a friendly nation. Nor had anyone of such stature made so sweeping a criticism of the international monetary system since its founding in 1944. There was Charles de Gaulle last week proclaiming that the primacy of the dollar in international dealings was finished, calling for an eventual return to the gold standard —which the world's nations scrapped 50 years ago — and practically inviting other countries to follow France's lead and cash in their dollars for gold. http://www.itulip.com/images/degaulle.jpgIt was a particularly nettling irritant just as the U.S. was deeply involved in making some hard decisions about its monetary policy.

The Drain. President Johnson faces the unpleasant task of producing what he calls "strong and specific" actions to deal with the persistent U.S. balance-of-payments deficit, a problem intimately related to gold. The President's advisers are still debating just how "strong" these imminent measures should be.

There is a growing awareness, heightened by De Gaulle's offensive, that past attempts to close the payments gap have been mere palliatives — and that the problem has begun to undermine U.S. influence around the globe.

Just before De Gaulle spoke, Treasury Secretary Douglas Dillon made the first public admission that the U.S. payments deficit in 1964 moved higher than anyone had expected. It totaled about $3 billion, all of which the U.S. is legally committed to exchange for U.S. gold on demand. The Federal Reserve announced that the U.S. gold supply declined last week by $100 million, to a 26-year low of $15.1 billion.

De Gaulle v. the Dollar, TIME Magazine, Feb. 12, 1965 (http://www.time.com/time/magazine/article/0,9171,840572,00.html)
The same TIME article that proposed a happy first meeting between De Gaulle and Nixon reported De Gaulle's continued goading of US monetary leadership:
"Despite the vicissitudes of the franc, De Gaulle insists that gold should ultimately be the sole international monetary standard, and that its official price must be increased, thereby devaluing the dollar. The threat of a fresh monetary crisis will dominate the Nixon-De Gaulle conversations. France's President hopes either to avoid that crisis altogether, or, if it comes, to make sure that it is not blamed on him alone. To that end, he wants joint efforts by the U.S., Britain and France to contain inflation and improve their balance of payments positions. Otherwise, he might have to devalue the franc by 20% or more—which would set off a shock wave of devaluations and imperil both the dollar and the pound."

A VOYAGE OF REDISCOVERY AND RECONCILIATION, TIME Magazine, Feb. 28, 1969 (http://www.time.com/time/magazine/article/0,9171,900672-9,00.html)
Younger readers wonder what it was all about.

Back in the old days, before it was "learned" that "payments deficits don't matter" and currency values started to be measured with the rubber ruler of government statistics they were measured using an immutable frame of reference: gold. A nation need not worry that its loan to another might be repaid in devalued currency. If France was concerned that the US had devalued the dollar and was repaying its debts to France with cheapened dollars, it could assert its right to demand payment in gold instead of paper. It was a free market monetary system for determining currency values. It offered governments no easy avenues for currency manipulation. If an international gold standard were in place today, China might demand a repricing of gold to devalue the dollar against gold to reflect the dollar's true exchange rate value rather than accept depreciation of its vast hoard of US Treasury bills. Or China could legally demand US gold instead, surely more than the US possess; US gold reserves of 8,133.5 tons are worth $208 billion today while China holds US dollar reserves in excess of $1.2 trillion. The international gold standard was a strict market-based taskmaster, making currency and trade imbalances transparent and leaving politicians with no place to hide out.

In the late 1960s, much as today, the US Treasury claimed a strong dollar policy but rising inflation in the US and among US trade partners told another story. De Gaulle wasn't buying the strong dollar tale and demanded not only payment of French debts with US gold but encouraged other European nations to do likewise.

Politicians love free markets the way Bostonians love the Red Sox–a lot when they are doing well, not at all when they aren't. Nixon got busy working out a way to repay the debts that the US had run up with its European trade partners with an asset less expensive to attain than gold. Paying the debts with an asset as cheaply and easily produced as Treasury paper was far more desirable.

So, in the early years of his administration, Nixon pulled the plug on the international gold standard.
"Less than a year ago, U.S. international financial policy was ruled by the idea of "benign neglect": the complacent conviction that Americans could continue pouring out their overvalued dollars, buying as many foreign goods and factories as they chose and spending on military ventures as lavishly as they pleased. The rest of the world, so the theory went, had to absorb all the dollars because the dollar was as good as gold. It had an "immutable" value in terms of gold, and the U.S. was pledged to sell American gold—at the rate of $35 an ounce—in exchange for dollars that foreigners wished to cash in. But as foreigners piled up almost $50 billion in U.S. currency, while the U.S. gold stock melted to $10 billion, that pledge became hollow. Nixon gave it the coup de grâce on Aug. 15 by decreeing that the U.S. would no longer redeem foreign-held dollars for gold."

The Quiet Triumph of Devaluation, TIME Magazine, Dec. 27, 1971 (http://www.time.com/time/magazine/article/0,9171,905590-1,00.html)
This "coup de grâce" was not a devaluation, in De Gaulle's view, but a default.


http://www.itulip.com/images/mzmvsgdp.gif
The point when the US went off the international gold standard is apparent in this graph.
After 1971, the ratio of money supply Money at Zero Maturity (MZM) growth to economic
output GDP diverged from a ratio of close to 1:1 where it had remained except during
wartime since the establishment of the Republic. Today the ratio stands at 6:1, meaning
that the money supply is now growing six times faster than the economy.

Fast forward to November 7, 2007. The dollar has plunged 33% against the euro since 2002. The most direct threat of action by US trade partners came again, as in 1971, from a French President, Nicolas Sarkozy. He told a joint session of the U.S. Congress that the Bush administration must stem the dollar's plunge "or risk a trade war."


http://www.itulip.com/images/wups.jpg
Currency trader in Japan 11/12/07

Today, as the dollar fell hard against the yen, the news on the currency front went from bad to weird. Stealth devaluation of the dollar has been tough on strong trade partners like France and Germany, but the impact is more severe on the nations on the edges of the global monetary system.
Currency Controls Return as Central Banks Fight Gains (http://www.bloomberg.com/apps/news?pid=20601087&sid=a0Droxt1g__E&refer=home)
Nov. 12, 2007 (Gavin Finch and Ye Xie - Bloomberg)

Central banks from Bogota to Mumbai are imposing foreign-exchange curbs to take control of their soaring currencies from traders dumping the dollar.

In Colombia, international investors buying stocks and bonds must leave a 40 percent deposit at Banco de la Republica for six months. The Reserve Bank of India created a bureaucratic thicket to curb speculation by foreign money managers. The Bank of Korea is investigating trading of currency forward contracts to limit gains in the won, now at a 10-year high.

Instead of using currency reserves or interest rates to influence foreign exchange markets, central banks and finance ministries are setting up obstacles to keep the falling dollar from threatening company profits and economic growth. The U.S. currency slumped 10 percent this year against its biggest trading partners, the steepest decline since 2003, while Treasury Secretary Henry Paulson has reiterated that the U.S. supports a "strong" dollar.

"Central banks are struggling to find new ways to intervene against their currencies and some of the proposals simply can't work," said Mirza Baig, an analyst in Singapore at Deutsche Bank AG, the world's biggest currency trader. Some plans are "truly bizarre," he wrote in a report.
The parallels between international monetary events in 1971 and today are not a repeat but a rhyme of history. To highlight the similarities and differences, we bring the December 1971 TIME story up to date with our iTulip version:
For the past decade the US has enjoyed the complacent conviction that Americans could continue pouring out their overvalued dollars, buying as many foreign goods as they chose and spending on military ventures as lavishly as they pleased. The rest of the world, so the theory went, had to absorb all the dollars. (In the 1971 instance, the dollar had an "immutable" value in terms of gold, with the U.S. pledged to sell American gold—at the rate of $35 an ounce—in exchange for dollars that foreigners wished to cash in.) In the current instance, the value of the dollar is maintained by game theory: prisoner's dilemma (http://en.wikipedia.org/wiki/Prisoner%27s_dilemma). US trade partners were forced to buy dollars in order to support its value. If they did not, and the value of their current dollar holdings will fall and the price of their exports will rise, and that hurts their own economies as much as the US economy, so the theory went.

But as foreigners piled up more than $5 trillion in U.S. currency, 100 times the amount owed in 1971 before the last dollar crisis, while the US trade deficit balooned, its real estate market melted down, and its economy slowed, that pledge became hollow.
Sarkozy's pressure on the US is not a forcing function for a full blown international monetary crisis in the years ahead the way Charles de Gaulle's demand for US gold in the late 1960's led the US to "close the gold window" and abandon the gold standard. Markets will continue to punish the US for fiscal mismanagement, irresponsible monetary policy, flawed industrial policy, lop sided trade policy, and ham fisted foreign policy that includes, as in 1971, military ventures. Rather than a sudden crisis, we expect the death by a thousand cuts.

We got on the short side of the dollar here in 2001 and haven't budged. Now nearly everyone is a dollar bear. As contrarians we are uncomfortable on the same side of a trade as the majority of market participants, but until the causes of the dollar's decline–unsustainable US government policies–reverse, the bet on the dollar in 2007 is still a rhyme of 1971, unfortunately a downward path.

iTulip Select (http://www.itulip.com/forums/showthread.php?t=1032): The Investment Thesis for the Next Cycle™
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metalman
11-12-07, 06:56 PM
"We will heat our homes with your dollars!"

he didn't really say that, did he?

rj1
11-12-07, 07:18 PM
Sarkozy's pressure on the US are not a forcing function for a full blown international monetary crisis in the years ahead the way Charles de Gaulle's demand for US gold in the late 1960's led the US to "close the gold window" and abandon the gold standard. Markets will continue to punish the US for fiscal mismanagement, irresponsible monetary policy, flawed industrial policy, lop sided trade policy, and ham fisted foreign policy that includes, as in 1971, military ventures. Rather than a sudden crisis, we expect the death by a thousand cuts.

We got on the short side of the dollar here in 2001 and haven't budged. Now nearly everyone is a dollar bear. As contrarians we are uncomfortable on the same side of a trade as the majority of market participants, but until the causes of the dollar's decline–unsustainable US government policies–reverse, the bet on the dollar in 2007 is still a rhyme of 1971, unfortunately a downward path.

Inflation question. Is it absolute or relative, or does absolute inflation matter?

If you don't understand my question, think of air pressure. Air pressure of open air is 14.7 psi. The recommended air pressure in your car tire may be something like 30 psi. It's not really 30 psi, it's actually 44.7 psi. But when you measure you're really measuring the difference between the air pressure in the car tire relative to the air. The absolute air pressure does not matter.

Is inflation the same way? We all know that the U.S. is devaluing its currency. But if every other country in the world were doing it, does it still matter? If the U.S. has 10% inflation year-over-year, and the Euro Zone decided to let inflation increase to say 6%, does the 10% inflation matter or is it just the 4% difference between the two currencies that matters?

The reason I'm asking is I am wondering if the Fed's and the Treasury's plan is to inflate the dollar, but that by the size of the U.S. economy and the number of dollars abroad, the U.S. inflation will force other economies to "inflate or suffer", partially negating the bad effects here. (I'm trying to figure out what Bernanke and Paulson are trying to do. I don't think they're stupid, I think they know full well what they're doing and devaluing the dollar on purpose. But I can't figure out what they're trying to accomplish.)

FRED
11-12-07, 08:28 PM
Inflation question. Is it absolute or relative, or does absolute inflation matter?

If you don't understand my question, think of air pressure. Air pressure of open air is 14.7 psi. The recommended air pressure in your car tire may be something like 30 psi. It's not really 30 psi, it's actually 44.7 psi. But when you measure you're really measuring the difference between the air pressure in the car tire relative to the air. The absolute air pressure does not matter.

Is inflation the same way? We all know that the U.S. is devaluing its currency. But if every other country in the world were doing it, does it still matter? If the U.S. has 10% inflation year-over-year, and the Euro Zone decided to let inflation increase to say 6%, does the 10% inflation matter or is it just the 4% difference between the two currencies that matters?

The reason I'm asking is I am wondering if the Fed's and the Treasury's plan is to inflate the dollar, but that by the size of the U.S. economy and the number of dollars abroad, the U.S. inflation will force other economies to "inflate or suffer", partially negating the bad effects here. (I'm trying to figure out what Bernanke and Paulson are trying to do. I don't think they're stupid, I think they know full well what they're doing and devaluing the dollar on purpose. But I can't figure out what they're trying to accomplish.)

EJ asked me to post:

qwerty posted the following link last week. The story addresses your question.

1967: Wilson defends 'pound in your pocket' (BBC) (http://news.bbc.co.uk/onthisday/hi/dates/stories/november/19/newsid_3208000/3208396.stm)

The Prime Minister, Harold Wilson, has defended his decision to devalue the pound saying it will tackle the "root cause" of Britain's economic problems.

The government announced last night it was lowering the exchange rate so the pound is now worth $2.40, down from $2.80, a cut of just over 14%.

The decision came after weeks of increasingly feverish speculation and a day in which the Bank of England spent £200m trying to shore up the pound from its gold and dollar reserves.

In a radio and television broadcast this evening, the Prime Minister said devaluation would enable Britain to "break out from the straitjacket" of boom and bust economics.

It does not mean that the pound here in Britain, in your pocket or purse or in your bank, has been devalued."

- Prime Minister Harold Wilson
The only alternative, he said, was to borrow heavily from governments abroad - but the only loans on offer were short-term ones.

The government inherited an £800m deficit from the Conservatives when it was elected three years ago.

Mr Wilson said Labour had managed to reduce the deficit, but the cost of hostilities in the Middle East, the closure of the Suez Canal and the disruption to exports through the dock strikes had contributed to the strain on sterling.

He said: "Our decision to devalue attacks our problem at the root and that is why the international monetary community have rallied round.

"From now the pound abroad is worth 14% or so less in terms of other currencies. It does not mean, of course, that the pound here in Britain, in your pocket or purse or in your bank, has been devalued.

"What it does mean is that we shall now be able to sell more goods abroad on a competitive basis."
The argument is nonsense and the opposition party jumped all over it.

Conservative leader Edward Heath has also appeared on television to reply to Mr Wilson's broadcast.

He accused the Labour Government of failing in one of its foremost duties - to safeguard the value of the country's money.

He said: "Having denied 20 times in 37 months that they would ever devalue the pound, they have devalued against all their own arguments."
Needless to say, the devaluation did NOT address the "root" problem. The "root" problem was that Britain had not yet dealt with the consequences of the reverse of capital flows from its former colonies that resulted after its empire ended in 1948 and continued to live beyond its means. Britain's economy finally hit bottom nine years later on September 29, 1976 when Britain under PM Callaghan applied to the IMF for a loan of $3.9 billion. To get an idea of how much money that was, in 1971 when the US defaulted on its gold obligations, it owed the world $50 billion. Today it owes $5 trillion. If the US were to need an emergency international loan under similar circumstances today, it would need to borrow on the order $4 trillion.

National currency devaluations and are always moves of desperation. Under the floating exchange rate system, these are no longer acknowledged as there is no drain on gold from the nation's treasury to explain. Two important points. One, the vast majority of the US population is too unaware of the consequences of dollar devaluation for President Bush to need to explain the 33% devaluation of the dollar against the euro since 2002 in the way Prime Minister Harold Wilson needed to explain a 14% devaluation to the British people in 1967. In fact, Bush's Treasury Secretary Henry Paulson continues to lie about the fact, at least "20 times in 37 months." Second, under the US single party state there is no need to apologize for fear of attack by the opposition party. There is no opposition party, and either party will do the same.

The question is, once the US is no longer able to sell long term bonds to Asia, Europe, and oil producing countries in amounts needed to support domestic spending and US leadership is forced by circumstances to stop lying about the fact, what will they do?

That is the real question we have been discussing here all these years.

NemoPublius
11-12-07, 08:55 PM
The question is, once the US no longer able to sell long term bonds and US leadership is forced by circumstances to stop lying, what will they do?

That is the real question we have been discussing here all these years.


Is there any evidence of this so far? 30-year Treasuries (http://finance.yahoo.com/q?s=%5ETYX) yield 4.6%, for crying out loud.

All other indicators of excessive money creation (i.e. inflation) are here, except for those stubborn bonds. I have yet to read a convincing explanation -- with some evidence to back it up -- for how this can be.
Very puzzling.

Contemptuous
11-12-07, 09:26 PM
iTulip writes:

<< Second, under the US single party state there is no need to apologize for fear of attack by the opposition party. >>

This seems either a controversial assertion, or an eye opener for me, and I have no idea which it of the two it may be.

I was under the impression that genuinely bi-partisan electoral mechanisms still exist in the US, although weakened? I thought our admittedly weakened electoral mechanisms still provid a good deal more mechanism for a functioning republic than the "vestigial" democracy visible in the cardboard institutions of tin-pot states?

Is there or is there not a large and still deep legacy in this country, from it's heyday as a federal republic, to still allow (fairly easily in purely legal terms) for a grassroots movement to commandeer one or the other of the main political parties, and so compel it to mandate a change of course for the country?

The component that seems lacking seems to be not the legal or electoral mechanisms for genuine multi-party power sharing, but rather a general apathy and lack of national will to confront realities. Americans prefer to hide in national slogans. The weakness is in the public, not in the institutions. That's a major difference, and describing this weakness as a "one party state" would then risk being inaccurate (a.k.a. exaggeration)?

My question then is: How does the "US single party state" if it exists, reliably secure it's vested interests today, according to iTulip? If it can't be shown to secure it's vested interests with an iron fist, i.e. there is no impenetrable institutional moat through which an awakened American public could not walk to take back it's government, then how can we say America is genuinely a one-party state?

This sounds altogether too bleak and ascribes to the US constitution a fatal weakness which it has not yet demonstrated (to my mind).

Uncle Jack
11-12-07, 09:53 PM
Is there any evidence of this so far? 30-year Treasuries (http://finance.yahoo.com/q?s=%5ETYX) yield 4.6%, for crying out loud.

All other indicators of excessive money creation (i.e. inflation) are here, except for those stubborn bonds. I have yet to read a convincing explanation -- with some evidence to back it up -- for how this can be.
Very puzzling.

You might even call it a conundrum.

metalman
11-12-07, 09:56 PM
iTulip writes:

<< Second, under the US single party state there is no need to apologize for fear of attack by the opposition party. >>

This seems either a controversial assertion, or an eye opener for me, and I have no idea which it of the two it may be.

I was under the impression that genuinely bi-partisan electoral mechanisms still exist in the US, although weakened? I thought our admittedly weakened electoral mechanisms still provid a good deal more mechanism for a functioning republic than the "vestigial" democracy visible in the cardboard institutions of tin-pot states?

Is there or is there not a large and still deep legacy in this country, from it's heyday as a federal republic, to still allow (fairly easily in purely legal terms) for a grassroots movement to commandeer one or the other of the main political parties, and so compel it to mandate a change of course for the country?

The component that seems lacking seems to be not the legal or electoral mechanisms for genuine multi-party power sharing, but rather a general apathy and lack of national will to confront realities. Americans prefer to hide in national slogans. The weakness is in the public, not in the institutions. That's a major difference, and describing this weakness as a "one party state" would then risk being inaccurate (a.k.a. exaggeration)?

My question then is: How does the "US single party state" if it exists, reliably secure it's vested interests today, according to iTulip? If it can't be shown to secure it's vested interests with an iron fist, i.e. there is no impenetrable institutional moat through which an awakened American public could not walk to take back it's government, then how can we say America is genuinely a one-party state?

This sounds altogether too bleak and ascribes to the US constitution a fatal weakness which it has not yet demonstrated (to my mind).

really? you can close your eyes, listen to hillary and any republican and tell them apart? how? on these issues? ron paul is different but one man is not a party. he is the exception that proves the rule. the fact that republicans aren't out screaming about the devaluation is proof that we have a one party state. absolute proof.

c1ue
11-12-07, 09:56 PM
Inflation question. Is it absolute or relative, or does absolute inflation matter?


RJ,

It depends on who you are.

If you are in the country with higher inflation, then it is absolute inflation which matters.

If you are outside of the country in question, then relative inflation matters - but not in the way you think.

In this case, the change in prices of goods times volume, then compared to your own economy, is what matters.

Think of it this way: When the US had a strong dollar and Mexico went through their peso crisis, Mexico's problems had very little effect on the US since the US/Mexico trade was small and furthermore it was Mexico with the inflation problem.

However, if the US has an inflation problem, you can be pretty sure Mexico is affected as the same relative trade has a much larger impact on Mexico.

Thus our present devaluation/inflation is affecting everyone else in the world since the US is the big boy in terms of trade.

My mental analogy uses ice and fire as an example. Fire represents inflation; if your chunk of ice is on fire and sitting next to a big chunk of ice, the big chunk of ice doesn't get affected much. If you are the small piece of ice next to a large flaming glacier, well, you're going to get melted!

metalman
11-12-07, 09:58 PM
You might even call it a conundrum.

good one. wonder what the brit bond yield curve looked like as the brit empire started to unravel.

jk
11-12-07, 10:20 PM
Is there any evidence of this so far? 30-year Treasuries (http://finance.yahoo.com/q?s=%5ETYX) yield 4.6%, for crying out loud.

All other indicators of excessive money creation (i.e. inflation) are here, except for those stubborn bonds. I have yet to read a convincing explanation -- with some evidence to back it up -- for how this can be.
Very puzzling.

2 possible factors i can think of:

1. pension funds, burned by the 2001-02 bear market, found religion in the form of matching their assets and their liabilities, so need long duration instruments and are relatively price insensitive in this pursuit.

2. deflation believers. gary shilling, for example, still is recommending long bonds on the theory that we're headed into deflation. he's been recommending long bonds for a long time and, so far, he's been right. with the financial system under obvious stress, some investors will buy duration instead of just going with tbills.

Contemptuous
11-12-07, 10:22 PM
Metalman -

That's no kind of proof at all. The fact you discern almost complete "cloned" homogeneity of views between one party and the other substantively does not remotely demonstrate that the institutional structures are any less than fully functioning to allow a multi-party functioning republic.

I have yet to see the tough, factual arguments demonstrating exactly where the electoral process has set up impenetrable barriers to a popular backlash against the status quo. Where is it exactly that the institutional mechanisms now clearly block a grassroots party from introducing a change agenda?

Monotonous or brainwashed similarity of views between the two major political groups has little or nothing to do with the legal and electoral structures of a democratic state. What afflicts the US today is a moral failure. The institutions still largely hold, and that's a huge difference.

I read many descriptions on this website which openly suggest it's a one party state here. I think these opinions would undergo a drastic change and lose their "tenderness" towards our current constraints, if they were ever char-broiled by a genuinely one-party state environment.

I'm completely open to being wrong - I just haven't seen the convincing argument for it yet. The malady is moral, it's within the electorate - not within the institutions. Curiously, that is almost the more fatal illness of the two. However, it does not by any means describe a 'one-party state'.

rj1
11-12-07, 11:10 PM
EJ asked me to post:


qwerty posted the following link last week. The story addresses your question.
1967: Wilson defends 'pound in your pocket' (BBC) (http://news.bbc.co.uk/onthisday/hi/dates/stories/november/19/newsid_3208000/3208396.stm)



The Prime Minister, Harold Wilson, has defended his decision to devalue the pound saying it will tackle the "root cause" of Britain's economic problems.



The government announced last night it was lowering the exchange rate so the pound is now worth $2.40, down from $2.80, a cut of just over 14%.



The decision came after weeks of increasingly feverish speculation and a day in which the Bank of England spent £200m trying to shore up the pound from its gold and dollar reserves.



In a radio and television broadcast this evening, the Prime Minister said devaluation would enable Britain to "break out from the straitjacket" of boom and bust economics.



It does not mean that the pound here in Britain, in your pocket or purse or in your bank, has been devalued."



- Prime Minister Harold Wilson
The only alternative, he said, was to borrow heavily from governments abroad - but the only loans on offer were short-term ones.




The government inherited an £800m deficit from the Conservatives when it was elected three years ago.



Mr Wilson said Labour had managed to reduce the deficit, but the cost of hostilities in the Middle East, the closure of the Suez Canal and the disruption to exports through the dock strikes had contributed to the strain on sterling.



He said: "Our decision to devalue attacks our problem at the root and that is why the international monetary community have rallied round.



"From now the pound abroad is worth 14% or so less in terms of other currencies. It does not mean, of course, that the pound here in Britain, in your pocket or purse or in your bank, has been devalued.



"What it does mean is that we shall now be able to sell more goods abroad on a competitive basis."

The argument is nonsense and the opposition party jumped all over it.
Conservative leader Edward Heath has also appeared on television to reply to Mr Wilson's broadcast.



He accused the Labour Government of failing in one of its foremost duties - to safeguard the value of the country's money.



He said: "Having denied 20 times in 37 months that they would ever devalue the pound, they have devalued against all their own arguments."
Needless to say, the devaluation did NOT address the "root" problem. The "root" problem was that Britain had not yet dealt with the consequences of the reverse of capital flows from its former colonies that resulted after its empire ended in 1948 and continued to live beyond its means. Britain's economy finally hit bottom nine years later on September 29, 1976 when Britain under PM Callaghan applied to the IMF for a loan of $3.9 billion. To get an idea of how much money that was, in 1971 when the US defaulted on its gold obligations, it owed the world $50 billion. Today it owes $5 trillion. If the US were to need an emergency international loan under similar circumstances today, it would need to borrow on the order $4 trillion.

National currency devaluations and are always moves of desperation. Under the floating exchange rate system, these are no longer acknowledged as there is no drain on gold from the nation's treasury to explain. Two important points. One, the vast majority of the US population is too unaware of the consequences of dollar devaluation for President Bush to need to explain the 33% devaluation of the dollar against the euro since 2002 in the way Prime Minister Harold Wilson needed to explain a 14% devaluation to the British people in 1967. In fact, Bush's Treasury Secretary Henry Paulson continues to lie about the fact, at least "20 times in 37 months." Second, under the US single party state there is no need to apologize for fear of attack by the opposition party. There is no opposition party, and either party will do the same.

The question is, once the US is no longer able to sell long term bonds to Asia, Europe, and oil producing countries in amounts needed to support domestic spending and US leadership is forced by circumstances to stop lying about the fact, what will they do?

That is the real question we have been discussing here all these years.

But are Bernanke and Paulson devaluing the dollar just as an ill-fated attempt at propping up manufacturing? I have to think that cannot be just it, as manufacturing has suffered for a long time, and no one in power really cared, there has to be something more.

GRG55
11-12-07, 11:36 PM
RJ,

It depends on who you are.

If you are in the country with higher inflation, then it is absolute inflation which matters.

If you are outside of the country in question, then relative inflation matters - but not in the way you think.

In this case, the change in prices of goods times volume, then compared to your own economy, is what matters.

Think of it this way: When the US had a strong dollar and Mexico went through their peso crisis, Mexico's problems had very little effect on the US since the US/Mexico trade was small and furthermore it was Mexico with the inflation problem.

However, if the US has an inflation problem, you can be pretty sure Mexico is affected as the same relative trade has a much larger impact on Mexico.

Thus our present devaluation/inflation is affecting everyone else in the world since the US is the big boy in terms of trade.

My mental analogy uses ice and fire as an example. Fire represents inflation; if your chunk of ice is on fire and sitting next to a big chunk of ice, the big chunk of ice doesn't get affected much. If you are the small piece of ice next to a large flaming glacier, well, you're going to get melted!

It's hard to think of these tiny desert sheikhdoms in the Arabian Gulf as "little chunks of ice" (it's November and I'm still running the air conditioners in my home), but your point is amply illustrated by the imported inflation, amplified by the pegged currencies, being experienced here half way around the world from the USA.

MLM
11-12-07, 11:38 PM
The last time there was a serious "third party" was Perot, and I believe that Clinton sized up the major issues (the federal deficit in particular) Perot was running on and changed course to address them.

I'd say you've got it right that the system is still in relatively good shape.

“The fault, dear Lukester, lies not in our stars, but in ourselves.”

Contemptuous
11-13-07, 12:36 AM
Hey Metalman - sorry to bend your ear!

You know what, I'm not a bleeding heart patriot with my heart on my sleeve either! They can take the whole sorry mess and do whatever the F*** they want with it.

I'm gonna bail out of here one of these days and go live in Malta, or Cyprus or someplace (maybe the Galapagos Islands?) and tell America and it's beautiful constitution, which we've trashed with apathy and unholy debt, to go get stuffed. :D So there!





P.S. And yes I realise this is all hopelessly off-topic. I'll harder try to stay on topic in the future - really ...

*T*
11-13-07, 08:41 AM
Is there any evidence of this so far? 30-year Treasuries (http://finance.yahoo.com/q?s=%5ETYX) yield 4.6%, for crying out loud.

All other indicators of excessive money creation (i.e. inflation) are here, except for those stubborn bonds. I have yet to read a convincing explanation -- with some evidence to back it up -- for how this can be.
Very puzzling.

China, other FCBs pegging explains the anomalous demand at the back end of the yield curve. I like Brad Setser for analysis on this. FCBs won't be stopping anytime soon. Until then, let's party like it's 1929!

EJ
11-13-07, 09:59 AM
The last time there was a serious "third party" was Perot, and I believe that Clinton sized up the major issues (the federal deficit in particular) Perot was running on and changed course to address them.

I'd say you've got it right that the system is still in relatively good shape.

“The fault, dear Lukester, lies not in our stars, but in ourselves.”

Indeed the Perot's and Paul's influence the debate from outside the two main parties or in the case of Paul from within. However, once elected, the performance of Presidents of either of the two parties has become increasingly indistinguishable over the past 20 years. They are all FIRE Economy presidents.

To the point of the article, in the days of party politics, not coincidentally before the development of the FIRE Economy, one party or the other would seize upon the depreciation of the dollar to score points with voters. My point is that neither party is doing this today as a party issue. One reason is that voters don't understand or care. The other is that dollar depreciation has occurred more under both parties.

FRED
11-13-07, 10:30 AM
good one. wonder what the brit bond yield curve looked like as the brit empire started to unravel.


http://www.itulip.com/images/GBP.gif
dollardaze.com (http://www.dollardaze.org/blog/?post_id=00107)

Contemptuous
11-13-07, 01:07 PM
This is where I get an iTulip smackdown for being impertinent ... (gulp! :o )


112

jk
11-13-07, 01:13 PM
This is where I get an iTulip smackdown for being impertinent ... (gulp! :o )



the dollars might be better quality for that purpose than what they're using now.

jimmygu3
11-14-07, 01:35 AM
Inflation question. Is it absolute or relative, or does absolute inflation matter?

This reminds me of a physics question I once heard, asking what would appear different if everything in the universe increased in size tenfold. Though my immediate reaction was that the relative relationships between planets, objects, blood cells, etc. would be the same, a deeper look reveals that gravity would have a much greater influence than in the smaller universe, creating earthquakes and terrific calamity as the Earth is sent hurtling toward the sun.

So, yes, absolute inflation matters. If all currencies inflate in tandem, exchange rates remain stable, but debts are repaid with devalued paper with less purchasing power. Interest rates must rise to include an inflation premium, putting strain on economic growth. Slowing economies and scarce jobs may keep wages down even as goods prices rise.

I'm trying to figure out how the "Earth is sent hurtling toward the sun" part of the analogy works. I suppose it's an international fire sale of assets to those with cash. Ten years ago I would say the US was the sun. Perhaps China is the sun now?

Jimmy

FRED
11-14-07, 10:26 AM
Dollar slide pushes UAE to currency-peg crossroads (http://www.signonsandiego.com/news/business/20071113-0559-uae-economy-.html)
November 13, 2007 (Masayuki Kitano - REUTERS)

TOKYO – The United Arab Emirates is at a “crossroads” on the dirham's dollar peg, the central bank said on Tuesday in the clearest signal yet that the U.S. currency's slide is forcing Gulf oil producers to review exchange rates.

The euro rose 15 ticks against the dollar after Central Bank Governor Sultan Nasser al-Suweidi's remarks raised expectations that the UAE, Saudi Arabia and three neighbours were looking to unshackle their currencies from the dollar as Kuwait did in May.

Currencies also rallied across the world's biggest oil exporting region, although Suweidi said any policy shift would be decided by the rulers of the six Gulf states preparing for monetary union as early as 2010.

Given the bleak outlook for the dollar and the U.S. economy, the six could consider tracking a currency basket rather than the greenback, he said, without making clear whether that could happen before or after monetary union.

“The dirham's peg to the U.S. dollar has served the economy of the UAE very well in the past,” Suweidi said in a speech hosted by the Japan Bank for International Cooperation and the Japan Institute for Overseas Investment in Tokyo.

“However, we have reached a crossroads now with a further deterioration in the U.S. dollar and expected further weakening of the U.S. economy,” he said.

Dollar pegs force Gulf central banks to track U.S. monetary policy to maintain the relative value of their currencies, at a time when Federal Reserve is cutting rates and inflation in the Gulf is running at decade highs.

metalman
11-14-07, 10:51 AM
Dollar slide pushes UAE to currency-peg crossroads (http://www.signonsandiego.com/news/business/20071113-0559-uae-economy-.html)
November 13, 2007 (Masayuki Kitano - REUTERS)

TOKYO – The United Arab Emirates is at a “crossroads” on the dirham's dollar peg, the central bank said on Tuesday in the clearest signal yet that the U.S. currency's slide is forcing Gulf oil producers to review exchange rates.

The euro rose 15 ticks against the dollar after Central Bank Governor Sultan Nasser al-Suweidi's remarks raised expectations that the UAE, Saudi Arabia and three neighbours were looking to unshackle their currencies from the dollar as Kuwait did in May.

Currencies also rallied across the world's biggest oil exporting region, although Suweidi said any policy shift would be decided by the rulers of the six Gulf states preparing for monetary union as early as 2010.

Given the bleak outlook for the dollar and the U.S. economy, the six could consider tracking a currency basket rather than the greenback, he said, without making clear whether that could happen before or after monetary union.

“The dirham's peg to the U.S. dollar has served the economy of the UAE very well in the past,” Suweidi said in a speech hosted by the Japan Bank for International Cooperation and the Japan Institute for Overseas Investment in Tokyo.

“However, we have reached a crossroads now with a further deterioration in the U.S. dollar and expected further weakening of the U.S. economy,” he said.

Dollar pegs force Gulf central banks to track U.S. monetary policy to maintain the relative value of their currencies, at a time when Federal Reserve is cutting rates and inflation in the Gulf is running at decade highs.

dollar down and gold and oil up on the news. time to crank up the beegees

algerwetmore
11-14-07, 11:26 AM
Indeed the Perot's and Paul's influence the debate from outside the two main parties or in the case of Paul from within. However, once elected, the performance of Presidents of either of the two parties has become increasingly indistinguishable over the past 20 years. They are all FIRE Economy presidents.

To the point of the article, in the days of party politics, not coincidentally before the development of the FIRE Economy, one party or the other would seize upon the depreciation of the dollar to score points with voters. My point is that neither party is doing this today as a party issue. One reason is that voters don't understand or care. The other is that dollar depreciation has occurred more under both parties.

It is interesting that when any President of the U.S. threatens to print money outside of the Federal Reserve or any central bank that TPTB
do not take kindly to that message.
I did not realize that JFK (a democrat) had threatened to authorize congress to print greenbacks outside of the Federal Reserve system, much like what Lincoln(a republican) had proposed a hundred years earlier.
I suspect that though Ron Paul's message to abolish the IRS and other government institutions is seductively attractive, the media has long been coached to dismiss such common-sense rhetoric as naive and sophmoric.

jimmygu3
11-14-07, 11:45 AM
dollar down and gold and oil up on the news. time to crank up the beegees

This time is different, metalman. In the '70s, American consumers all drove alone in large, gas-guzzling cars. We vowed never to get caught over a barrel like that again. :rolleyes:

GRG55
11-14-07, 01:30 PM
This time is different, metalman. In the '70s, American consumers all drove alone in large, gas-guzzling cars. We vowed never to get caught over a barrel like that again. :rolleyes:

You did. They're called HOV lanes...;) Problem solved!

FRED
11-14-07, 03:31 PM
Update:

Sarkozy fears 'economic war’ as dollar slides (http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/11/08/cnsarko108.xml)
Nov. 11, 2007 (Telegraph UK)

French president warns US it cannot allow currency to collapse as Europe suffers from euro's rise, reports Ambrose Evans-Pritchard

The French president, Nicolas Sarkozy, has warned the United States Congress that the US risks triggering "economic war" if it attempts to devalue its way out of trouble by allowing a relentless slide in the dollar.

President Nicolas Sarkozy fears 'economic war’ as dollar slides
Tough talking: President Nicolas Sarkozy of France warned Congress in Washington yesterday

The stunning remarks came as the greenback plunged to a record low of $1.4731 against the euro, causing a chorus of angry protests from industrial leaders in France and Italy. The dollar breached $2.10 against sterling for the first time since the early Thatcher years in 1981. On Wall Street the Dow tumbled 246.40 to 13,414.50.

Mr Sarkozy spared no sensitivities as he launched into a full-blown attack on the Bush Administration. "The dollar cannot remain solely the problem of others. If we are not careful, monetary disarray could morph into economic war. We would all be its victims," he said.

"Those who admire the nation that has built the world's greatest economy and has never ceased trying to persuade the world of the advantages of free trade expect her to be the first to promote fair exchange rates." Stephen Jen, an analyst at Morgan Stanley, said the dollar fall had become alarming. "This has been driven so far by Middle Eastern and Asian central banks, but there is a risk that hedge funds will start to join in, and they can be very powerful," he said.

"The most dangerous threat is that the yen will snap back and destroy the 'carry trade' before anybody has a chance to unwind positions."

Ann
11-14-07, 07:21 PM
This is where I get an iTulip smackdown for being impertinent ... (gulp! :o )


112

Silly boy!

Contemptuous
11-14-07, 07:59 PM
Sorry Ma'm, I shan't do it again, I promise. I understand these are very important men, and national diplomacy is at work here. :rolleyes:

jimmygu3
11-14-07, 11:50 PM
Sorry Ma'm, I shan't do it again, I promise. I understand these are very important men, and national diplomacy is at work here. :rolleyes:

Good point, Lukester. In that spirit, I have decided to abandon my "We will shower our mistresses with your bonars!" cartoon. Wouldn't be appropriate.

c1ue
11-15-07, 09:30 AM
I'm trying to figure out how the "Earth is sent hurtling toward the sun" part of the analogy works.

Jimmy,

Substitute 'retired/fixed income people' for 'Earth', and you're on the right path.

Inflation not only increases the prices of new goods, it also erodes the value of stored wealth.

So those who don't work anymore get royally screwed unless somehow they can invest ahead of the inflation curve - hence the iTulip average age being relatively high.

Similarly those in jobs with little pricing power (and those industries for that matter) are going to see their earning power get reduced.

The interesting part is that those industries at present with pricing power are not going to be the ones in the coming inflation scenario.

jimmygu3
11-15-07, 11:48 AM
Similarly those in jobs with little pricing power (and those industries for that matter) are going to see their earning power get reduced. The interesting part is that those industries at present with pricing power are not going to be the ones in the coming inflation scenario.

c1ue,

What jobs & industries do you foresee losing pricing power and which ones gaining?

necron99
11-15-07, 08:13 PM
iTulip writes:
<< Second, under the US single party state there is no need to apologize for fear of attack by the opposition party. >>
This seems either a controversial assertion, or an eye opener for me, and I have no idea which it of the two it may be.
...
Is there or is there not a large and still deep legacy in this country, from it's heyday as a federal republic, to still allow (fairly easily in purely legal terms) for a grassroots movement to commandeer one or the other of the main political parties, and so compel it to mandate a change of course for the country?

iTulip is not a political forum, but I find these questions very interesting, so I hope you won't mind a long post.

The first institutional barrier that leaps to mind was the Supreme Court decision, six or eight years ago [too lazy to provide citation], which equated campaign contributions with free speech. This truly crystallized an already-extant problem -- both parties became not so much for- or against- any particular philosophy, as they were "Pro-Money" parties. The result is a vociferous debate which simulates two-party opposition, but is restricted to a narrow, pre-agreed range of alternatives.

The problem doesn't reside so much in the laws and institutions as it does with the combination of: (1) the huge expense of mounting a National or State-Wide political campagin, plus (2) the winner-take-all voting system (as opposed to proportional representation or voter ranking systems), which together mean it's illogical to risk any money or effort whatsoever upon unproven ideas or candidates. Therefore, everyone who reaches the top of their political party is basically cut from the same pattern and tends to support the same interests.

This problem is significantly compounded by the fact that both parties, when in power over the last thirty years or more, have enacted such shortsighted and venal economic policies that both parties are now severely compromised and have incentives to hide the same facts. I mean, geez, think about Alan Greenspan's career, serving both types of Administrations, and you will quickly see that we have had only one flavor of economic policy for at least that long. Ben Bernanke seems determined to continue the legacy. Sure we have two parties -- but if only one policy ever results, then the number of parties is trivial.

Your question doesn't mention third parties. Historically third parties have often introduced new ideas to the public, ideas which the two major parties have then co-opted and enacted, even though the third party was often not elected. It's easy to point to institutional barriers against third parties.

For example, the Commission on Presidential Debates (http://en.wikipedia.org/wiki/Commission_on_Presidential_Debates)was taken away from the NON-partisan League of Women Voters in 1984, and given to a "bipartisan" committee composed of former heads of the Republican/Democratic National Parties, spending strictly corporate money to host the event. So it was no surprise that, after Ross Perot surprised them in 1992 with a last-minute surge of support, the Commission basically wrote it into their policies that no 3rd-party candidate can appear in the debates unless he is currently polling 5.0% more than he is currently polling. We saw this demonstrated in 2000.

This isn't a formal institutional barrier against 3rd parties, but it's an effective one. In today's culture where information is largely controlled by huge national media conglomerates, 3rd parties cannot gain support without fielding a national candidate, and they can't do that without some public face time versus the major candidates, in order to distinguish themselves as an alternative.

People frequently argue that third parties should start with State offices before fielding National candidates, but also in 2000 I remember the Greens getting the same treatment when they tried to field candidates for California Governor and Senator -- locked out of State debates.

3rd parties also complain that, in order to field a National candidate, they must spend huge amounts of time and effort complying with a patchwork of 50 different arcane and deceptive sets of laws for getting on each State ballot. Meanwhile, the two major parties are automatically on each State ballot because they were on it last election.


The component that seems lacking seems to be not the legal or electoral mechanisms for genuine multi-party power sharing, but rather a general apathy and lack of national will to confront realities. Americans prefer to hide in national slogans. The weakness is in the public, not in the institutions.

Unfortunately, I have to agree with your conclusion, that ultimately it's the voters, not just politicians, who are stubbornly bent on ignoring obvious consequences of poor economic policy, preferring to keep re-electing these goons rather than consider difficult but saner alternatives.

Rajiv
11-15-07, 09:20 PM
iTulip is not a political forum, but I find these questions very interesting, so I hope you won't mind a long post.

The first institutional barrier that leaps to mind was the Supreme Court decision, six or eight years ago [too lazy to provide citation], which equated campaign contributions with free speech.



Buckley v. Valeo (http://en.wikipedia.org/wiki/Buckley_v._Valeo)


Buckley v. Valeo, 424 U.S. 1 (1976), was a case in which the Supreme Court of the United States upheld federal limits on campaign contributions and ruled that spending money to influence elections is a form of constitutionally protected free speech. The court also stated candidates can give unlimited amounts of money to their own campaigns.

.
.
.

Although the decision upheld restrictions on the size of campaign contributions, because it struck down limits on expenditures some argue that this precedent allows those with great wealth to effectively drown out the speech average citizens. Among those criticizing the decision on this line was philosopher John Rawls, who wrote that the Court's decision "runs the risk of endorsing the view that fair representation is representation according to the amount of influence effectively exerted." (See: wealth primary.)

On a somewhat different note, Justice Byron White, in dissent, argued that the entire law should have been upheld, in deference to Congress's greater knowledge and expertise on the issue.

From the other side, some disagree vigorously with Buckley on the grounds that it sustained some limits on campaign contributions which, they argue, are protected by the First Amendment as free speech. This position was advanced by Chief Justice Warren Burger in his dissent, who claimed that individual contributions and expenditures are protected speech acts. Justices Clarence Thomas and Antonin Scalia, who were not on the Court at the time of "Buckley," have argued for overturning Buckley on these grounds, but their position has not been adopted by the court. Despite criticism of Buckley from both sides, the case remains the starting point for judicial analysis of the constitutionality of campaign finance restrictions. See e.g. McConnell v. FEC, upholding the Bipartisan Campaign Reform Act of 2002 ("McCain-Feingold Bill"). This legislation included a prohibition on soft money as well as limits on independent expenditures by private groups.

Contemptuous
11-15-07, 09:28 PM
Necron99 -

Very much appreciate your posts. I seem to be having problems posting any reply on the oil thread I started in Commodities that got moved to Guest Commentary - I can't seem to post further into it without being an iTulip premium member. So please pardon my lack of reply there.

Seeing Italy close up for many years, that country seems a perfect example of ultra-representative democracy run amok - I saw how the most scrupulously egalitarian parliamentary avenues carried into a cacophony of 15+ splinter group parties. Other EU countries have this syndrome also, although most display a good deal better governability than the "Italian model".

Personally, after many years there, I sometimes get to feeling almost nostalgic for the particular kind of genial anarchy (society functioning largely without any real government) which is modern Italy. If there are any Italians here reading this, please accept this from me with great admiration for the spirit of the people

The "Italian Model", curiously, is absolutely, scrupulously democratic - it's like total democracy on steroids - but there is so 'much democracy' in the electoral process there, that nothing of any lasting value for governance comes out of it. It's a testament to the Italians' considerable entreprenurial capacities (the Northern third of Italy has I think the third or fourth highest per capita GDP in Europe!) that they've maintained their national level per capita GDP in the face of such a phenomenally compromised, overly egalitarian electoral system. Fragmentation is so systemic that all coalitions there are born very fragile.

Seems the US has for many decades suffered from the opposite, a kind of monolithic political spectrum (and political culture) in some ways, together with what now looks like an increasingly ineffective fractiousness of stereotypical left-right viewpoints. The feeling of existing in a very narrow political spectrum in America in recent years is sometimes overpowering.

But back in the "good" decades, e.g. the 1950's, 1960's and possibly 1980's and even 1990's, we were, probably mistakenly, admired for the great percieved 'stability' of the essentially two-party American system.

We definitely don't have any risk of falling prey to political fragmentation over here, do we? And yet that syndrome, which is an expression of some really admirable democratic impulses, is very widespread in many EU nations (and in other parts of the world now also!) which have always had at least 3-5 viable political parties.

For them it's normal, for us it's a quite startling idea. The better run and larger of EU nations for example, have a 'core' of probably 3 main parties who coalesce into functioning and even quite stable governments. In many though, there are several more parties outside of these 'main three, or 'main four', which range out to very small political groupings.

So there seems a degree of splintering of political groups in other parts of the world which would give Americans a severe case of "political agoraphobia".

So yes, this ties in with all your observations of how the US system tends to shove out all but the main two poles, and so to produce an ever narrower political spectrum - I guess you and I agree Necron99, that the principal rot in this country however springs from electoral apathy, and not the severe advancement of electoral roadblocks to a breakup of this status quo.

I really enjoy your posts, and your (highly depressing!) fiction, which paints a picture of our future glum enough for me to want to check out of here permanently. Your vision of America's future has got to be one of the most pessimistic and utterly depressing of any I've read comments on here. As such, you've definitely found your home here at iTulip Necron99, as there are a lot of us who would regard your pessimism as the most hard headed realism around! :D

P.S. - I am absolutely a backer of further, even quite activist, campaign finance reform in the US. Each nation needs to aproach this problem with corrective legislation to steer it towards a moderation of it's existing tendencies. In a country like Italy, the system is seriously in need of a constitutional overhaul which culls out a tremendous amount of debilitating splinter party "noise".

In the US, exactly the opposite is required, the "purist" constitutionalist views of our more conservative Supreme Court justices on this issue can do great harm to an electoral process that has devolved into monolithic bloat in the reality of electoral finance, which merely distorts democratic impulses.

Anyone can see it. If I had a say (which I don't) I would go straight across party lines here and align myself with those seeking to sharply prune back the influence of corporate lobbies - electoral finance reform takes precedence over conservative, dogmatically libertarian constitutional purism, for any sane observer of our current system. Indeed, it's all about being "politically agnostic", which in fact (coming full circle from earlier posts) is precisely what I've noted is your own strongest suit, Necron99.

c1ue
11-15-07, 09:37 PM
What jobs & industries do you foresee losing pricing power and which ones gaining?

I have not been trying to put together a common list, but in general I look at the hierarchy of needs:

1) Food and water - industries and jobs relating to these will see positive wage pressure
2) Basic services - health care outside of life extension and cosmetic, quality of life care, etc
3) Basic communications - telephone, internet access
4) Basic commodities - mining et al

Those losing pricing power:

1) marketing
2) sales
3) management
4) financial
5) luxury - including many electronics. I specifically exclude telecom but also specifically include high end software service companies such as CRM companies.

There will be exceptions to every category - these will depend on the specific company's/industry's monopolistic position.

EJ
11-15-07, 09:53 PM
Buckley v. Valeo (http://en.wikipedia.org/wiki/Buckley_v._Valeo)

Important reference, Rajiv.

In a democracy, an influential campaign contribution is free speech as a gun in the face of an unarmed man is a thief's exercise of his right to bear arms.

Contemptuous
11-15-07, 11:24 PM
Quite appropriate sarcasm, from Jimmygu3 on America's profligate energy budget - now we are going to be well and truly snookered by oil this time.

Jimmy Carter gave us a chance to do just one thing right in the 1970's, with a stunning degree of far seeing vision, but we declined the offer, perhaps because of the overly homespun style that went along with it.

The following administration tore his water heating solar panels off the White House roof with horror and ideological repugnance. Personally Mr. Carter's piousness gave me a headache, but on the other hand the present incumbent's piousness does also, and frankly Reagan's did too! They all give me a headache! :(

I glimpse another Democrat in the White House, wearing yet another fashionably bulky sweater all over again - for our future State of the Nation fireside chats. It's just as appropriate as it ever was. Does not mean it's a cheery prospect though.




This time is different, metalman. In the '70s, American consumers all drove alone in large, gas-guzzling cars. We vowed never to get caught over a barrel like that again. :rolleyes:

necron99
11-16-07, 03:38 PM
Necron99 -
Very much appreciate your posts. ...
Seeing Italy close up for many years, that country seems a perfect example of ultra-representative democracy run amok - I saw how the most scrupulously egalitarian parliamentary avenues carried into a cacophony of 15+ splinter group parties. Other EU countries have this syndrome also, although most display a good deal better governability than the "Italian model".

Thank you very much for all the compliments, Lukester -- (also thanks a lot to Rajiv for pulling up the important reference that I was too lazy to look up...) Back at'cha, dude, I always look forward to reading your posts even if I don't comment on them.

It probably won't surprise you if I say I'm in complete agreement with your assessment of Italy. If you couldn't guess from my comments, I have done some political work for 3rd parties in the past, and the "mainstream" political activists I talk to always bring up the example of Italy. "If we just let any number of parties into power, there would be chaos like there is in Italy."

Well first of all, exactly as you say, I think the USA suffers from a problem that is opposite of chaos -- for lack of a better word, call it ossification, being locked by a comfortable stability into bad policies. The "mainstream" politicos will then dutifully deny to me that the USA has any problem like that whatsoever in the slightest -- and then in the next breath, talk about how screwed up is our military policy or our immigration policy or our health care system or our energy policy etcetera etcetera etcetera. As I mentioned, Americans like to personalize politics, and so we insist on blaming George Bush and only George Bush for the Iraq war; Senate Democrats for the immigration policy, etcetera, rather than for one single moment admitting that these problems are institutional and chronic, and won't vanish when the hated politician is out of office.

Something else to keep in mind about multiple parties is the example of England: the numerous and silly political parties there tend to divvy up and drain away the votes of the stupid, reactionary, or uninformed voters; making it easier for "serious" political parties to build a plurality, and therefore focus on real policies and concrete issues. By contrast, both American political parties are forced to pander to so many interest groups at opposite ends of issues within their own party, that they end up not saying or accomplishing anything whatsoever. Immigration is a great example of this. The bigot component of the Republican party wants radical action that the corporate Republicans will never, ever support; multiculturalists within the Democrats want radical action that neither the poor, nor the corporate Democrat wing will ever support either, for different reasons (recall my earlier comment that we don't have two opposition parties; we have two parties that are both pro-money). I imagine that if we had a multiplicity of parties like England, the radical anti- and pro-immigration "single-issue" parties would basically cancel each other out, and the mainstream parties might actually enact some slightly sensible compromise.

As for my "depressing" fiction -- I think it might have been Ray Bradbury who said, "I don't write [science-]fiction to predict the future, but rather to avert it." I don't hold out any hope I will be even a fraction as influential as Ray Bradbury, but ya just gotta try anyway...