Losing Faith in the Dollar
By Alan Caruba
June 6, 2011
Something I never thought I would ever see in my former hometown, a wealthy New Jersey suburb of New York City, was a Dollar Store, but one opened recently in a former supermarket. Dollar Stores are giving Wal-Mart, Target, and similar outlets a run for their money and it’s hard not to see why. The local one has just about everything you could need and all for astonishing low prices.
In countless ways people are looking to save money these days. The looming problem, however, is the question of what happens when Americans wake up to learn that even a dollar can no longer buy anything?
“When Faith in U.S. Dollars and U.S. Debt is Dead the Game is over – And that Day is Closer than You May Think” is the cheery title of an article recently posted on EconomicCollapse.com.
There’s a reason why both the mental condition and the financial condition are called a Depression. It’s hard to be happy about anything when your nation’s currency is not worth the paper on which it is printed. Right now, the Federal Reserve’s answer to that is to print more money and to continue to buy U.S. debt with it. This is a Ponzi scheme.
There isn’t a day that goes by when some U.S. government agency doesn’t send me a news release to announce that it is giving millions in grants for something and, lately, there isn’t a day that goes by without the news reports telling me and every other American, Democrat, Republican, or independent, that our elected leaders are not negotiating. This is because Obama has shown no indication of wanting to negotiate with Republicans whom he openly scorns.
Meanwhile, the so-called “entitlement” programs represent sixty percent of all the money the government spends. Without some changes, these programs are unsustainable.
In a Mid-May article posted on American Thinker.com, Randal Hoven spelled out a number of facts that are overlooked in the political battles between liberals and conservatives. “The entire debate is about a difference that is less than 4% of GDP. According to International Monetary Fund figures, government in the U.S. is spending 41% of GDP in 2011. The current debate is about whether government spends 40% or 44% of GDP.”
It is essential to keep in mind that, while government plunders every cent it can extract from those still fortunate to have a job, any investments, or will die at some point, both Republicans and Democrats have participated in expanding government since the last Great Depression.
While President Obama’s constant blaming of George W. Bush for his first two years became a joke, Hoven notes that Bush expanded Medicare with a prescription program and many of the “liberal” programs we conservatives denounce occurred while Bush was president. “No Child Left Behind?” Bush. Outlawing light bulbs? Bush. Ethanol subsidies? Bush.
None of this excuses President Obama whose “answer” to our current economic problems has been to propose raising taxes at a time when the most pressing need is to free up money for private investment, business expansion, and job creation. Obama, however, has not increased taxes and the stimulus included one third tax cuts and tax credits
More to the point, when Obama should have been taking steps to get the economy going again he devoted the last two years to taking over both the health care industry and the financial sector, pushing through two bills, each in excess of 2,000 pages. More government control is the last thing this nation needs at this time. Or any time.
The United States of America has been spreading the wealth with so-called “entitlement” programs, Social Security and Medicare, since the 1930s and 60s when they came into being. The result is that they constitute 60% of federal spending today.
Social Security will be insolvent by 2037 and, together with Medicare, they have unfunded liabilities of $107 trillion in today’s dollars. That is seven times the size of the U.S. economy and ten times the size of the national debt.
The problem for the United States is the falling confidence and faith in the U.S. dollar. It is the default reserve currency of the world. Just about everything trades in U.S. dollars. It’s not only Americans losing faith in our government’s ability to maintain its value, it is everyone else.
In April, Standard & Poor’s downgraded its outlook on U.S. government debt from “stable” to “negative.” It warned that the U.S. could lose its prized AAA rating. Unless Congress and the current occupant of the White House take specific steps to fix Social Security and Medicare, the dollar compared to other major national currencies will continue to fall. It has fallen 17% since 2009. Moody’s rating service has also issued its own warning.
Pretty soon, nobody will want to buy U.S. securities that currently borrow 41 cents of every dollar the government spends. The U.S. borrows about $168 million every single hour.
In April, CNSnews reported that “the federal government made $125 billion in ‘improper payments’ in fiscal 2010, more than eleven times the total 2010 spending by the U.S. State Department.”
That’s a government that doesn’t know what it’s doing and isn’t in a hurry to fix it.
That’s why a Dollar Store just opened in one of the most affluent suburbs of New Jersey.
I know the economists and others keep saying that the Recession that began in 2007, ended in 2009. I know they can and will cite all manner of good economic indicators, but if faith in the U.S. dollar continues to falter, it won’t matter.
Alan Caruba is an American public relations counselor and freelance writer who is a frequent critic of environmentalism, Islam and research on global warming. In the late 1970s Caruba founded the PR firm The Caruba Organization, and in 1990, the National Anxiety Center, which identifies itself as "a clearinghouse for information about 'scare campaigns' designed to influence public policy and opinion" on such subjects as global warming, ozone depletion and DDT.