I know God will not give me anything I can't handle.
I just wish that He didn't trust me so much.
Mother Teresa
Sowell on Multiculturism
Existentialist Economics -- Love This Video
Discussion of Wallison's Review of the Economic Tsunami
John Allison, a highly successful former CEO to the North Carolina-based BB&T bank, is the successor to CEO Ed Crane; the familiar reader may recall the bitter dispute between Crane and billionaire Charles Koch, another founder and generous sponsor. I found Allison's introduction engrossing and actually makes me want to read each man's book on the crisis. Allison's remarks reflect my opinion on Fed performance. I have found this well-written dissent of Walison from the FCIC majority report on the economic tsunami on the AEI website, Wallison makes a compelling case that the majority commission lacked basic transparency. I agree that Glass-Steagall was a red herring, that what was different about this bubble bust was the federal government's subsidies and policies promoting high-risk mortgage lending (not to mention predatory borrowing--underqualified people with little or no collateral exploiting lax underwriting standards
More Bad News for the Dollar
I think most Americans are underestimating what having the world's reserve currency means. One analogy I might make is of a token system (think of, for example, Chuck E Cheese where tokens, not coins, are used to operate games). There are certain transactions, like oil, where transactions are typically priced in dollars. This artificially creates demand for dollars. The US basically is an implicit middleman. Of course, we also have goods and services for sale in dollars. Before Nixon in 1971 took the US off the gold standard (other countries were concerned the US was trying to print its way out of deficits and wanted to convert their dollars into gold), gold was in theory or fact the world's common currency. In fact, the Fed's attempts to defend the dollar by raising interest rates (lessening demand for gold conversion) is thought by monetarist critics to have exacerbated the Depression; higher interest raised the cost of doing business in a weak economy and hurt bank margins and loan demand. Notice the purchasing power of the dollar began to weaken after FDR outlawed gold ownership and the dollar was devalued by raising the price of gold in dollars for international trade settlement.
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| Courtesy of Seeking Alpha |
The rest of the world is not fooled by the Fed's easy money policies; even if the Fed allows 2% inflation a year, that means losing nearly half the value in a dollar over the coming generation. It is important not to be distracted by the even worse prospects of the euro and yen over the near term. Anything that slackens demand for dollars, like direct currency exchanges, is not good for its purchasing power. Iran has been seeking alternative barters with its trading partners, India and Japan directly exchange, and China has announced a number of arrangements including Russia, Brazil, and most recently Australia. I've also mentioned how several central banks have been building up their gold reserves (an alternative to holding dollars).
Musical Interlude: My Favorite Groups
Earth, Wind & Fire (with The Emotions), "Boogie Wonderland"
