Shame of the Shrinking Dollar

Three Asians and an American were stranded on a deserted island.

They got down to divvying up jobs. One Asian said she would fish. Another volunteered to gather coconuts, berries and fruit. The third decided to gather fire wood.

The American volunteered to eat. He would eat his fill, and then let the others divide up whatever was left.

Now, if you are a modern economist you will say that the American is an essential cog in the system. He is creating a demand for the products produced by the Asians.

The problem is, one day the Asians wake up, and get to thinking if they threw the American in the drink, they would not only have more food for themselves, but would be able to spend some time sunbathing and frolicking in the surf.

That day has dawned in Asia.

The only reason the American dollar has any value, is that the world has faith that it is issued by a healthy and vibrant financial system.

However, nowadays the dollar is simply a promise to keep eating. As the value of American eating has increasingly ceased to impress Asians and Europeans, the value of the dollar has decreased.

So the Federal Reserve “prints” ( actually they set policies which permit the banks, who actually create the bulk of the money through the lending process, to increase the size and number of their loans) more dollars.

But, in the end, this makes the dollar worth even less. Everyone understands this. If, in an innocent world, there was only one Eat-Me-Elmo, then he is quite valuable. When every American girl has one, you can't give Elmo away.

It doesn't help when American consumers use plastic to purchase all their stuff, in other words a virtual promissory note to pay back paper promises to keep eating , along with a shitload of interest. A credit card transaction is a loan—and like I said, every loan “prints” more money.

I don't mean to be professorial, but for those who do not know how this works, I will give a real oversimplified explanation. When you go to a bank to buy a house, they do not actually have that $200,000 in their vault. By regulation they have to have a small percentage of it, but not the whole thing. So when they cut the borrower a check, they have effectively created or printed money. And that is the way that most money is “printed.”

So all that patriotic shopping at the mall, the loose mortgages, etc. created more dollars---making the dollar more and more worthless:



Then the government gets in the act. It was already a gluttonous pig when George Bush came to town, but Sonny has managed to make LBJ look thrifty.

Congress does not have anywhere near enough money to pay their bills---so they borrow. And, as I was saying, borrowing creates more money. The frosting on the cake is most of the money is borrowed from China and the Jihadists.

Of course, the United States always pays its debts. But in order for there to be enough money available to pay these debts, the Federal Reserve has to set policies to insure there is sufficient liquidity to cover our government's spendthrift ways.

The American dollar has shrunk 25.8% since 2000. If the US dollar had kept pace with the Euro, the going rate of a barrel of oil (which are traded in dollars) would be around $80, rather than $140. Gas would be about $2.60 a gallon.

One might think all this inflation, and economic hardship, would be enough to wake Americans up.

But since it is not:

Don't we have a freakin' ounce of pride?

A few years ago, when the loonie slipped in value, there was widespread patriotic outrage in Canada, with demands that their currency be shored up.

However, Americans, for the most part, don't seem to care at all.

We define patriotism by the wearing of flag lapels.

And shopping.