Carol Perry: Become informed about debt, deficit
January 27, 2013
Weary of partisan bickering, citizens have all but given up hope that any long-term solutions to our debt and deficit problems will be addressed any time soon. Yet not only does the majority of our population continue to rely on our government for answers, they want to increase reliance on government to be primary problem-solvers. Are you kidding? Just look at the government’s track record to date.
Americans, more interested in the goings-on of celebrities than understanding the relationship of the Federal Reserve and the U.S. Treasury, seem oblivious to the dangers of such ignorance. With a waning population of those who remember the Great Depression, fear that something terrible can actually happen due to blatant interest rate and currency manipulation is going away as quickly as the “greatest generation” itself. That gift of fear, something other nations are very familiar with, seems absent here. Is this due to successful propaganda on the part of government or a bury-your-head-in-the-sand mentality on behalf of the population? It is perhaps a bit of both.
When asked if you truly understand the mechanics of “quantitative easing,” can you answer in the affirmative? The less informed a population is, the easier to manipulate. So if you think you are not being manipulated, you are indeed misinformed. These days, most people get their “news” from political commentary, that slants more toward their point of view, than from actual news sources. Folks like Sean Hannity or Bob Beckel are not really journalists delivering unbiased events of the day, but entertainers. The truth is that there are very few unbiased sources for hard news anymore, so you actually have to go searching for them. That takes effort and the average citizen has not the time or the appetite for truth. Not knowing how perilous our fiscal problems really are is pervasive. This allows people to sleep at night. If they knew that Germany is repatriating their gold from U.S. reserves or that other nations are stockpiling the metal as a hedge to a dollar collapse, would their slumber be disturbed? For some of you there is still that feeling lingering in the pit of your stomachs that we only temporarily dodged a bullet back in 2008. Anyone who has read my column since then knows I feel that the so-called recovery is nothing more than manipulation of information. Good examples of this are the huge differences in reporting of the CPI or GDP to actual headline inflation and unemployment. Very little attention is paid to how this creative accounting effects our currency or our lives.
In today’s real world, the U.S. is the primary instigator of a currency war started with the first round of QE, followed by QE2 and now QE indefinite. In an attempt to balance our deficits against surplus nations, we are printing currency from nothing, debasing the value our dollar against other currencies. When we were still on the gold standard, surplus nations could redeem U.S. dollars for gold, forcing us to reverse deficit spending or lose our gold reserves. We effectively erased any need to rid ourselves of deficit spending by suspending gold conversion in 1971, and we have run deficits ever since. Many other currencies are pegged to our dollar, so each time we attempt to inflate away deficits by printing money, we force other nations to print as well, successfully exporting the inflation to other countries. This attempt to make our exports cheaper in foreign markets has wreaked havoc on the economies of other countries, but each attempt has also led to disaster domestically. Since the creation of the Federal Reserve Bank in 1913, we have seen a 95 percent reduction in the purchasing power of the dollar. This supposedly was offset by rising wages, but do any of you believe this is true? Some of you older folks can remember when Dad could support the entire family without the need for Mom to work outside the home. After going off the gold standard, we experienced massive inflation, forcing Mom into the workplace to make ends meet. Then Mom and Dad had to use all of their savings to maintain their standard of living. Finally, the family lived on debt until it all blew up in 2008.
Now leveraged to the hilt with little or no savings, the consumer, who is responsible for 70 percent of our annual GDP, cannot spend. No matter how much currency the Fed prints, we are unable to return to pre-2008 levels of prosperity. With total indifference, the incumbent administration, confident in our continued deficit spending, returned to Washington along with many of the same politicians advocating the policies of the Federal Reserve. How will this all end? Like each time before the Fed deliberately debased the dollar, it will end badly. Only this time, with a globalized economy, the whole world will suffer with us.
War need no longer be fought on the battlefield, but rather in the dark pools of sovereign wealth funds, hedge funds and commodities pits. All that is needed to destroy our nation, ending our reign as reserve currency, is a coordinated attack on the dollar. There are those in government as well as the media who say this will never happen. Other nations need our consumer-driven economy to market their goods, but at what cost? With QE negatively impacting every trading partner, we alone will be left to defend the dollar and the odds are not in our favor. Who knows what event will eventually spark massive dollar dumping, but the informed will have a better chance to weather the storm or even profit.
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• Carol Perry is a retired financial adviser and has been a Northern Nevada resident since 1983. She can be reached at Carol_Perry@att.net.