01/08/2004: 
Criminally Absurd
US dollar headed down the same toilet as the Argentine peso
NY Times [Registration Required] by way of BoingBoing
Not long ago, a post on the Canadians in the US list reminded expats earning Yankee dollars that the US dollar had climbed to an all-time high, and now would be a great time to pay off Canadian student loans and credit-card bills.
How the dollar has fallen! Charlie Stross, recently retired from writing for a British magazine to write novels full-time, largely for US publishers, notes that the US dollar has hit an 11-year low against the UK pound. In the past couple months, I've watched my own purchases on trips to London get 4-5% more expensive, as the rate went from $1.7 to $1.8 to the pound. For Charlie -- earning US dollars, spending UK pounds -- this is a 4-5% pay-cut, courtesy of the world currency markets.
Writing in the New York Times, Paul Krugman notes that the US dollar's ride down the toilet has not occurred in a vacuum. Rather, it is the consequence of the current administration's tax-the-poor-and-not-the-rich-and-spend-in-Iraq fiscal policy, which is sending the US debt and deficit into unprecedented levels.
Unprecedented in the US, that is. The economic policies of the Bush administration do have a solid precendent further south, in Argentina, where "business-friendly, free-market policies would...allow the country to grow out of...budget and trade deficits," but where, instead, the economy collapsed spectacularily.
Remember the pictures of women in fur coats smashing ATMs in Buenos Aires after the banks froze everyone's accounts? The miles-long barter markets that took up positions down the middle of the national highways, allowing refugees to swap their meagre possessions for the necessities of life?
Krugman says that the Argenitinification of the US economy is a serious possibility, and discounts the fuzzy Schwarzzenegarian deficit plans ("I will examine the books!") as a plan in "flat defiance of the facts."
"Substantial ongoing deficits," they warn, "may severely and adversely affect expectations and confidence, which in turn can generate a self-reinforcing negative cycle among the underlying fiscal deficit, financial markets, and the real economy. . . . The potential costs and fallout from such fiscal and financial disarray provide perhaps the strongest motivation for avoiding substantial, ongoing budget deficits." In other words, do cry for us, Argentina: we may be heading down the same road.Comments?
4 Annotations Submitted
Thursday the 8th of January, W. noted:
Four more years! Four more years! Four more years!
Thursday the 8th of January, prof_booty noted:
a weak dollar is really good for many sectors of the US economy. Specifically exporters like auto and tech manufacturers who export stuff around the world. suddenly u.s. goods are alot more affordable overseas. dont think the fed will let the dollar fall too far without raising interest rates and getting our bank and other national banks who benefit from a strong us economy to prop up the currency.
Thursday the 8th of January, john maynard keynes noted:
my plans are succeeding perfectly.
Thursday the 8th of January, rafuzo noted:
The behavior of the dollar will never satisfy economists, least of all Paul Krugman. The dollar is strong, we're killing ourselves with a trade deficit and other nations are struggling. The dollar is weak, and we're fucked.
In any event, Krugman's argument about this being precipitated by Bush's "tax-the-poor-and-not-the-rich" is retarded, seeing as tax cuts have almost zero effect on inflation and purchasing power; those forces rest with someone else.
In fact, not only is Krugman's "analysis" flat out wrong, it's downright unethical. Krugman, educated as an economist, is either a complete moron or (more likely) a sham artist who would sell out the truth for his political views. Of course, it makes sense this Marxist morality play would be posted on boingboing; Cory Doctorow, the playboy "sci-fi author", is an avowed Trotskyist.
