Vegas
03-11-2008, 12:32 PM
http://www.forbes.com/columnists/forbes/2008/0324/027.html
Can it be true? A Republican president repudiating the anti-inflationary legacy of Ronald Reagan? That is precisely what George Bush is doing. Not deliberately, of course, but the result is the same. We're in for the most serious bout of inflation since the presidency of Jimmy Carter. And so far this President and his officials remain oblivious to the magnitude of what they are inadvertently bringing about.
The Treasury Department bureaucracy has long believed in a weak dollar as a means of redressing the supposed problems of our trade imbalance. These bureaucrat-economists ignore copious evidence on the destructiveness of currency devaluation. Debasing your money may increase exports and reduce imports, but only for a time. Eventually costs rise, thereby reducing corporate profits. Prices are readjusted.
Easy money also begets domestic economic distortions. Commercial and mortgage brokers behaved recklessly in 2005--06, but the Fed's creation of excess dollars made the binge far worse. Civil law has made it clear that bartenders are liable when they continue to serve inebriated customers. This, in effect, is what Alan Greenspan and Ben Bernanke should be because they kept dishing out excess money.
The surge in commodity prices is already having enormous repercussions, not only in the cost of products and services but also in political and social disruptions. Iran and Venezuela have hundreds of billions of dollars in windfalls with which to practice their malignant political mischief. Developing countries such as Mexico, Indonesia and Egypt are facing dangerous political crises as rising food costs hammer their none-too-prosperous populations. Strains with our allies are growing as their exporters are unfairly punished.
Here in the U.S. voter anger and anxiety will only grow. Expect increased labor unrest as higher prices eat away at the purchasing power of paychecks.
Only after the massive rejection of Republicans in the 2006 congressional elections did the Bush White House fundamentally alter its war strategy in Iraq. Perhaps a devastating flight from the dollar--the kind that precipitated the 1987 stock market crash--is needed to shake the White House out of its damaging weak-dollar rut.
Can it be true? A Republican president repudiating the anti-inflationary legacy of Ronald Reagan? That is precisely what George Bush is doing. Not deliberately, of course, but the result is the same. We're in for the most serious bout of inflation since the presidency of Jimmy Carter. And so far this President and his officials remain oblivious to the magnitude of what they are inadvertently bringing about.
The Treasury Department bureaucracy has long believed in a weak dollar as a means of redressing the supposed problems of our trade imbalance. These bureaucrat-economists ignore copious evidence on the destructiveness of currency devaluation. Debasing your money may increase exports and reduce imports, but only for a time. Eventually costs rise, thereby reducing corporate profits. Prices are readjusted.
Easy money also begets domestic economic distortions. Commercial and mortgage brokers behaved recklessly in 2005--06, but the Fed's creation of excess dollars made the binge far worse. Civil law has made it clear that bartenders are liable when they continue to serve inebriated customers. This, in effect, is what Alan Greenspan and Ben Bernanke should be because they kept dishing out excess money.
The surge in commodity prices is already having enormous repercussions, not only in the cost of products and services but also in political and social disruptions. Iran and Venezuela have hundreds of billions of dollars in windfalls with which to practice their malignant political mischief. Developing countries such as Mexico, Indonesia and Egypt are facing dangerous political crises as rising food costs hammer their none-too-prosperous populations. Strains with our allies are growing as their exporters are unfairly punished.
Here in the U.S. voter anger and anxiety will only grow. Expect increased labor unrest as higher prices eat away at the purchasing power of paychecks.
Only after the massive rejection of Republicans in the 2006 congressional elections did the Bush White House fundamentally alter its war strategy in Iraq. Perhaps a devastating flight from the dollar--the kind that precipitated the 1987 stock market crash--is needed to shake the White House out of its damaging weak-dollar rut.