And Fox News is Playing the Violin

On a partisan press

Let me begin by stating my position clearly.

I hate the partisan press.

In the political world the press needs to hold the government's collective feet to the fire. It is a staple of democracy and a tradition that goes back at least a couple of millennia.

Fox news drives me crazy.

In totalitarian regimes the first thing any dictator does is take control of the media. It is no co-incidence that we believe that the Russian people are completely behind Putin. Putin controls the media.

Why would any newsman in a free society blindly tow the party line?

There is no good answer.

Some results of this in no particular order:

1. People in general do not believe the press,
2. People with partisan viewpoints only watch the news that espouses their point of view giving them a very narrow view of the country,
3. People are more comfortable with the info the get from the Daily Show than from the evening news, and
4. The government gets away with untold evils.

(Send me your additions and I will repost a more complete list next week)

One of my favorite anecdotes

A local and recently elected politician could not wait to deal with the press. You see, the incumbent who was thrashed in the election was vicerated by the media during his entire term. The new representative took this to mean that the press was clearly on his side and would be a great asset during his term.

He was wrong. His vivisection by the local press began with his first decision and he openly wondered where all his friends had gone.

Integral part of the democratic process

The press is an integral part of the democratic process, that is why it has a special place in the bill of rights.

When an administration runs amok and rips up the constitution it is the press that is supposed to step in (remember watergate?) and expose the crimes.

Why?

Well, those under the command of the administration cannot always be counted upon to act in the interest of the people. The press is NOT under the command of the administration and must, yes must, hold the governments collective feet to the fire. If they don't the system fails.

They haven't, and the system has failed.

Disagree?

Don't think the system has failed?

The USA is actively engaging in torture. By doing so they are collecting flawed intelligence and making unilateral decisions based on it. The green back has fallen 50 percent. Inflation is about to grip the nation.

And Fox News is playing the Violin.

Time for a Plymouth... er make it a double.

Rate Cut Euphoria Scares Me

I am not kidding.

To those Americans living solely between the oceans and the borders the rate cut was good news. In fact the Dow rallied to a multi-month high.

Yippee!!!!

How can this be a bad thing?

Well, as regular readers will know, I am concerned with the state of the dollar. My simple point is that a weak dollar is a symptom of a weak economy.

Let me see if I explain. The USA is running budgetary deficits. That means that every day the US Government uses other countries money to pay it's bills. This Government treats China and Dubai the way many people treat Visa and Mastercard.

This is how it works. The US spends billions of dollars more than it collects in taxes and fees. In order to pay for that spending the government goes to China and Dubai (and others but those two are currently the main purchasers) and says, "Please purchase our bonds at 4ish% interest so that we can keep spending".

As long as there are buyers of debt at these prices the economy is safe; but, if those countries decide to buy even a little bit less than needed, the US government would be force to either immediately reduce spending (not likely), raise taxes (not on Dubya's watch) or raise the rate on the bond to make it more attractive (hurting home buyers and generally slowing the economy but perhaps avoiding a catastrophic economic event).

By lowering the rate (as happened today) the government is making those all important debt instruments less attractive. And what happened to the dollar today, when the rate was decreased and the Dow jumped? It fell --again.

I laughed out loud while listening to the Glenn Beck Show in CNN today. He had an admitted doomsday economist on that suggested if all goes wrong the dollar could see a drop in its valuation of as much as 50% !!!

Guess what? It has already happened.

In January 2002 one greenback was worth 1.61 Canadian dollars; today the close was 1.0146!!!

Does this make sense to you? What it means is that anything purchase from outside the walls of Bushdom is now forty percent more expensive than it would be if it were purchase with pre-Dubya dollars. People, this includes oil. Yes, Oil! The quirky result of the massive military spending (largely the reason for the current deficits) is that by paying for it with debt we have increased the price of the commodity that was at the core of the action: oil.

Am I making sense?

Let me lay out a likely bad case scenario. While the USA is lowering the interest offered on its debt instruments, countries such as Canada that do not run deficits and have little risk of dollar devaluation are keeping their interest rates stable. So Dubai and China can get over 5% from a Canada that is paying down its debt and is a good bet to not default by devaluing or they can get around 4% from the US. So, Dubai and China buy a bit less American debt. This is not unlike what Daddy Bush faced after his, "No new taxes" speech. Remember that?

So, to summarize. The US dollar is plummeting. US debt instruments are less attractive to those who would be bailing the Bushies out. And spending is up.

Folks, this is frightening.

And unless we have an administration that is willing to reduce spending to equal the record tax and fee revenue (here) that Bush has collected the outlook is terrifying.

Forget recession, this is a recipe for a depression. Now, that is depressing and frightening.

Arrggghhhh!!!!!

Time for a plymouth and a nap.

For a related rant click here.

Overvalued, Devalued Dollar

A recent article in Bloomberg has fired up a rant. Ready?

As regular readers will know, I am concerned with the state of the dollar. My simple point is that a weak dollar is a symptom of a weak economy. This concern is fueled by the apparent lack of concern from the Bush administration.

All is not well.

Right now the US is totally dependent on foreign countries (mostly China) purchasing debt. That deficit that pundits like Tony B. and Pat B. (the "B" Twins) don't care about does not involve some fantasy banking system, quite the contrary, it involves real countries buying real debt at prices they are happy with.

It is that last part that scares me.

What would happen if the total debt became large enough that China, Dubai and others decided to purchase a bit less of of the fresh version? I am not talking about a fictitious dooms-day scenario, but a very real possibility. If foreign countries decided to purchase a bit less American debt, the US would be faced with two options. One, raise the interest payed in order to sell debt, or two, cut spending.

The second is politically unpopular, the first, devastating. An increase in debt rate would be a de facto further devaluation of the dollar (again, weak economy, weak dollar). This means an immediate raise in the price of every import --including oil.

Does this sound like fiction? Well, in the past 6 years the US Dollar has gone from purchasing 1.56 Canadian Dollars to the current rate of 1.06 Canadian Dollars. The neighbors from the north have not suddenly become the most prosperous nation. No, their economy has been stable. It is the dollar that is now two thirds as valuable as it was not too long ago.

What does this mean? It means that a huge amount of the increase in the price of a barrel of oil is only being felt in the US. The price of oil has not gone up near as much elsewhere. The dollar has gone down.

Okay, time to tie this to the article in Bloomberg.

Quote:

The U.S. Treasury took two years to persuade the International Monetary Fund to police global currency markets -- and just two months to trash the initiative once the IMF adopted it.

Treasury officials recruited the IMF to be a currency cop as China and other countries meddle with exchange rates to gain a trade advantage. Instead, the international lending organization took aim at the dollar, calling it overvalued in an Aug. 1 report.

More,

IMF staff economists told U.S. officials in meetings ended July 27 that their research showed the dollar was 10 percent to 30 percent overpriced, according to an account included in the 54-page Aug. 1 report.

The Experts that the US hired to look into currency fixing have come to the conclusion that the current greenback is overvalued. This is frightening.

This means abysmal US dollar purchasing power on the international stage is being artificially supported.

Who is overvaluing it? Not the US. No, the dollar is being held aloft by the countries that are happy to buy debt at an inflated price. To a large degree it is being artificially buoyed by the very country the pols are upset with, China.

China doesn't need to buy US debt. They could spend some of their enormous pile of surplus cash on their own economy. They could, in very short order, raise both the level and the numbers of the Chinese middle class to the point where the average Chinese family had a car instead of a couple of bicycles. (What would this do to the price of oil?) But they "choose" to buy overvalued American debt.

By the way, what do you think the response was to the IMF ruling?

...on Aug. 2 an aide to Treasury Secretary Henry Paulson told Congress that it's impossible to measure a currency's fair value.

So, to summarize. The US has asked the IMF to look into the Chinese currency because it is unfairly valued. But when the IMF looks at the unfair value of the greenback, the response is swift,

...it's impossible to measure a currency's fair value.

Where did I put my gin.

The American economy is not, as Karl Rove said on Meet The Press this last Sunday,

...dynamic and powerful, providing jobs and increases in real income for people.

After almost seven years of Bush/Cheney leadership, the American economy is weakened. It is not in serious trouble, but it is close. Overseas (and up north) the dollar now buys two-thirds of what it did less than a decade ago. The perception that all is well is part of the problem.

But all is not lost. I have a solution. It may sound simple, but that does not mean it lacks merit.

Stop borrowing.

That is the only way to regain control of the dollar. It is the only way to ensure that the dollar does not collapse.

How to stop borrowing? Simple. Spend less.

This administration is poised to collect record revenues (here), all they have to do to get out of this quagmire is spend less than they bring in.

Basic fiscal responsibility.

Simple.

Rant over.

Time for the last plymouth of the night. Cheers.

Cramer's Meltdown

I usually find Cramer's antics a little contrived --and I can't stand all the sound effects of his show. But, I became a bigger fan after watching his meltdown on CNBC on Friday.

I don't believe this was an act, I believe that this is a man that knows what he is talking about and cannot stand watching the Fed make a mistake that could put millions (yes, millions) of people out of their homes. He knows way more than I do and I am not going to make any points about what he is saying, however his extreme passion is well placed. Too often money shows are cleansed of emotion, this disregards the fact that peoples' lives are effected by the movements of the fed at a grassroots level: a small mistake by the fed hurts millions of people directly.

If you missed it, sit back, and click here.

After composing himself he gave this interview to explain the rant.

I almost wish he hadn't explained it.

Perhaps one day we'll see some emotion (other than defensive) in a presidential debate.