Public Plunder

Diagnosing the Diminishing Dollar

Holding a green piece of paper decorated with patriotic symbols as a proxy for economic value is an act of faith.  To do so with the currency of your own country is a necessary act of faith, since daily life requires it in order to make economic transactions.  But to hold sizable amounts of the currency, or the currency-denominated assets, of a foreign country is carrying faith beyond any warrant provided by human experience.  History clearly reveals that the eventual debasement of currency is as predictable as night following day.  Why, then, are our foreign-trade partners so eager to hold huge hoards of U.S. greenbacks?

A survey of the current economic landscape abounds with evidence of the debasement of the dollar.  Gold, the hedge of last resort for financial liquidity, has returned to its former price of $450 per ounce.  Oil prices that hovered around $20 per barrel in the 1990’s have more than doubled, while housing prices are growing at double-digit rates.

The typical American homeowner is attempting to profit from this debasement by borrowing as much as mortgage lenders will lend to buy the largest home that he can(not) afford.  Household debt as a percentage of Gross National Product has continually set records for the past two decades.  When interest levels return to normal and join soaring energy costs, these households will have a painful financial hangover...

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