Wednesday, January 23, 2008


...or, macroeconomics for dummies--I transcribed this from the Alex Jones Show, top of the second hour (1/22/08):

1. Dollar losing reserve currency status

The problem we have right now is that the United States dollar is losing its world-class status. People are no longer using the U.S. dollar as a second alternative to their own currencies–when I say “people,” I mean people of other nations. They used to have great reserves of US dollars on hand and in stock; because of the Bretton Woods agreement the United States dollar was exchangeable for gold and silver for foreigners even though it was illegal to own here in the United States after 1933.

2. End of gold standard and Bretton Woods

Well, Nixon had a problem with the Vietnam War going on and deficit spending--that the United States dollar was falling so fast and gold was going up so quick that Fort Knox was going to be emptied. And in order to stop that from happening, he raised the price of gold, first from $36 to $42 an ounce, and then the dollar continued to plummet, so he just shut the gold window completely and ended the Bretton Woods agreement.

3. The crux of the biscuit: Money out of thin air

Since then, there has been no limitation as far as to how much money can be printed and how much deficit spending can go on. Since 1972, we had an economic collapse practically in 1980 when Jimmy Carter was in office.

4. The crux of the biscuit, part 2: World is abandoning dollar (see #1)

I mean, the dollar’s falling real hard, so the foreigners that are sitting on these reserves want to sell their reserves. At the same time, the market’s not big enough to absorb them. If the Chinese started dumping their $1.3 trillion of cash and bonds and bills into the marketplace, to trade back into some stronger currency, they’ll set up a stampede with other countries as well. And entire portfolios will be wiped out.

So they’re sitting in a situation where they know that the value of their resource is going down very fast, but if they try to sell it, it goes down even faster. So they’re just trying to quietly get rid of it.

1 comment:

Freshmao said...

Hey Clinton,

I just wanted to correct #3 above. You must be referring to Ronald Reagan and not Jimmy Carter. FYI, I remember the double digit inflation rate of the 70's.