Friday, October 22, 2010

Fighting the fire is not a problem, we have plenty of gasoline

The G-20 get together in South Korea has produced an interesting letter circulated by US Treasury Secretary Tim Geithner where he proposes that 20 finance ministers should commit their nations to policies and actions that limit trade surpluses and trade deficits. The German representative reacted rather negatively implying that Germany wasn’t doing anything wrong, his argument is that Berlin’s surpluses were unrelated to the Euro to dollar disparity and were simply a sign of their trading strength. It was the US after all in the person of Richard Nixon who decided that currencies should float instead of being tied to a gold standard. He had that Vietnam War to pay for and inflation was just the ticket to reduce the debt.

In fact Germany has acquired a large chunk of the US over the last 40 years thanks to the “strong“ dollar policy (when they say strong, that‘s not what they really mean). Everything from US mining and manufacturing to publishing and insurance companies now belongs to the Reich land. In fact some of the best jobs left in America are at German firms. They treat Americans like crap compared to what they are required to do for workers in Germany but it’s a huge improvement over what the socio-paths in charge of US companies inflict on their workers.

In Korea, it’s assumed that Geithner is really talking about the Chinese renminbi and in fact China is eating everybody’s lunch. Japan’s finance minister Yoshihiko Noda, told reporters that numerical targets would be difficult to implement. Japan like Germany has benefited greatly from the Dollar/yen inequity, using it to great advantage to grab off huge swathes of the US economy and American hard assets.

Now however the Chinese Dragon has Japan by the leg and is chewing it off. Still Japan doesn’t want to offend China lest they cut off critical rare earth metals of which China controls 97% of the entire world’s supply. Japan is an isolated, over populated, under resourced string of islands and depends on its high tech manufacturing to survive. In a pinch the US could operate as an independent, self-sufficient, albeit 3rd world country, Japan would starve. No plan to oppose China will cross Japan’s lips lest the Dragon swallow them whole.

The central bankers like the Federal Reserve are also at the meetings in Korea and Bernanke’s threat or promise (depending on your point of view) to start printing money again has to weigh on everyone’s mind. It’s getting to the point where the US simply isn’t a major player in the world’s economy anymore but still controls the world’s reserve currency.

The M3 or total money supply (the Fed stopped publishing it in 2006) and it is now estimated to have fallen like a rock since 2008 despite the wanton printing of USDs but has again started to rise in recent months. The problem is that since the Masters of the Universe on Wall Street have been pumping out all manner of USD denominated garbage, the whole world is awash in dollars.

It was in fact these dollar based “products” and their derivatives that created the crash of ‘08 and not the small number of home loans given to jobless brown people; no matter what the right-wingers and the corporate media would have you believe. In fact according to the US Comptroller of the Currency: the top five US banks who account for almost all derivatives in the US banking system have sharply increased the amount they hold since the crash.

Now the US would like the rest of the developed nations to impose monetary policy to achieve balanced trade and/or the Fed will print another trillion dollars (still not clear if it‘s a threat or promise). This sort of thing used to be done with sensible tariffs and banking regulation. At least they’ve realized they have to do something, maybe after they’ve used up the gasoline they’ll try something else to fight the fire.


The Grey Tiger said...

As always Prairie you are right on target. Implementing simple trade tariffs as we had since the country began is far from the rape and pillage the corps have in mind. It makes Ross Perot in retrospect a very smart man at least on trade.

PitchingDoc said...

When you talk about Germany owning much of America, just heard that a 700-acre solar farm the Obama administration agreed to be built in the Midwest will be managed by a German company -