By Tom Kando
Here is a disturbing film on You Tube, "The Inevitable Collapse of the Dollar". It starts with a parable: 6 or 7 people are stranded on an island. They are all Asian, except for one American. So they divide up the chores - one Asian is in charge of fishing, another one hunting, another one gathers firewood, etc. The American's job is to eat.
Haha. Funny and mean, but true? Well, true enough to disturb me, but false enough to disturb me even more:
The parable is a preface to the film's main point, namely that America's economic conduct is unsustainable, and that the collapse of the dollar and economic ruin are imminent, because of the well-known reasons that we have been over-consuming, over-borrowing , and under-producing for decades.
I have been writing about this for years. I was warning against our trade deficit during the 1990s. And I remind you: this problem is distinct from the government deficit, upon which Republicans focus blindly and maliciously, telling us that it is government spending which is at the root of our problem. That is a falsehood. The real problem is that American society as a whole - you and me - have been overspending, buying too many goods and borrowing too much money from China and buying too much oil from Saudi Arabia.
But ultimately, the film is false.
1. First of all, things move slowly, at the macro level. The Titanic couldn't turn away from the iceberg in an hour. The US economy may be in decline and there may be a permanent economic realignment in the world, but these things happen in historical time, not personal time. If there is a collapse of the dollar, it is a slow process. It happens during the 20th and 21st centuries, not all of a sudden on March 17, 2018.
In a way, the dollar is not going to collapse. It has been collapsing for half a century: When I was a teenager, the dollar was worth 4 times more than European money - the Deutsche Mark, the Dutch Guilder, the Swiss Franc, the French Franc, etc. Today, it is worth 65% of Europe's currency, the Euro, and less than the Swiss Franc. And we're still doing okay, aren't we?
It may well be that in 20 years from now the the dollar will be worth 25% of the Euro. But this is not collapse, it is gradual readjustment.
2. The film was made in 2007. Four years later, the dollar is not significantly weaker.
3. There are those who say that a lower dollar helps us by making our exports cheaper. I'm not sure I agree with this line of reasoning, but it's there.
4. America's trade imbalance with the rest of the world is a problem, but it is not insurmountable. Already, the world recession has forced Americans to tighten their belt. Furthermore, our trade shortfall has been shrinking.
We export $1.3 trillion worth of goods and services annually. That is the third highest amount of any country - behind China and Germany. Is this how a lazy and unproductive parasite behaves? Our only problem is: we import even more: nearly $2 trillion.
But as I said, America's trade imbalance has been improving: In April 2011, our trade deficit narrowed to less than $44 billion. (see: List_of_countries_by_imports)
5. Many other countries also have trade deficits. And many have larger government deficits than we do. For example, Japan's government deficit is over 200% of its GDP.
6. But what I find most cynical in this Dutch film is the insinuation that America is the world's parasite. In fact the work ethic is stronger in the US than it is practically anywhere else, with the exception of some parts of Asia. It is certainly stronger than in Europe, where people go ballistic when they are asked to work 40 hours a week. Nothing is more important to an American than his job. He works as much for the love of work as for money. When he retires, he volunteers for no pay.
7. Are the Americans the parasitic eaters on that fictitious island, or the Europeans? The only reason that Europeans were able to get a free ride in their BMWs for the past 60 years was because America has shed so much blood and treasure as the world's policeman.
In general, the Dutch, the Germans and many others live cushier lives than most Americans. The US's vast pockets of poverty - the ghettoes and central cities of the rust belt, rural Appalachia, Indian reservations - have few equals in Western Europe.
Of course there are parasites in America - a plutocracy which has stolen an ever larger share of the country's wealth. But these thieves should not be confused with the hard-working and struggling American people. The American people are no more the parasites on that island than are the Western Europeans. If anything, it is the opposite.
So is the dollar collapsing? Granted, it has weakened a great deal over the years. But America's economic woes are not irreversible, nor are they worse than those of the rest of the Western World. leave comment here
Thursday, June 23, 2011
By Tom Kando