Saturday, September 22, 2007

Weak Dollar

The weak dollar gives manufacturers an edge in exports, which would be good if we were a manufacturing nation, but less than 6% of Americas are involved in manufacturing. We lose around 60,000 manufacturing jobs each month not because of what used to be the strength of the dollar, but because of strangling government regulations. Given our current form of government, these regulations are irreversible and manufacturing will continue to leave.

The weak dollar makes it more expensive to borrow money. Do you want to borrow ten ounces of gold? It will cost you $7,300 instead of the $3,500 it would have a few years ago. As the bills for our unfunded promises start to come due, this will accelerate the inevitable.

Using cash accounting, we have a $9 trillion deficit. It is illegal for corporations to use cash accounting. Under accrual accounting, our deficit is over $70 trillion. It makes sense for the government to crash the dollar because it would be easier to pay off existing debt. We just won’t be able to take on new debt.

And then we’ll have to figure out what to do with the dependent masses.

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