Is the dollar bubble generating pre-emptive action?

A currency trader(1) says the Swiss  National Bank started a currency war yesterday. Each country is thinking its currency is too high, hence low exports. That is the nature of self-interest compiled at the national level in capitalism. Analysts are essentially linking GNP and employment levels to currency exchange rates — wrong-headed but reflexive thinking.

There are already many signs that it is not possible to walk back into the dollar bubble. To restore economies to their previous luster, ever-increasing surplus would have to be handed to the united $tates to waste. Since such a bubble cannot go on forever, countries that adjust first will have the advantage in the long run.

The reason the united $tates has little inflation is that other countries hand it ever larger surpluses, both at the trade deficit level and the budget deficit level — not even to mention super-profits we have talked about at length before. If one were to show up in the united $tates and goods were no longer on the shelves, the dollar would not be worth anything. Yet those goods come from elsewhere, paid for by elsewhere. The dollar is the official currency of Madoff.

Of course people say the Euro is “not ready,” which it is true, only because it has not had proper value relative to the dollar long enough. The Europeans can run import businesses just like the Amerikans, once the currency rises high enough and people get used to it. The U.$. economy will never have the energy efficiency of the European economy, because Bubba likes his pick-up truck and running down French ideas about mass transit. Bubba in the rural, exurban and suburban areas makes an energy/dollar collapse relative to other currencies inevitable.

Chinese trade is down, but I do not have the required details.(2) Declines in export trade as MIM has argued before may seem more impressive than the effects on importers. If the international wage structure is not racist, then MIM will be proved wrong. If MIM is correct and any of that one-quarter loss of exports by China filters into the united $tates, the result will be small in visible initial terms but large in long-run impact. It will further crush the economy and ironically require an even larger trade deficit to cover up the result.

The Japanese economy contracted at a 12.1% annual rate in the last quarter of 2008.(3) It’s very important to leave the dollar bubble instead of taking ever greater losses to prop up the united $tates.

Notes:

1. http://www.fx360.com/commentary/kathy/818/eurchf-on-a-tear-after-snb-intervenes-cuts-rates-starts-qe.aspx?num=1236893324589

2. “The government said the U.S. trade imbalance dropped to $36 billion in January, the lowest level since October 2002. However, the politically sensitive shortfall with China bucked the trend, rising by 3.5 percent to $20.6 billion.”

http://news.yahoo.com/s/ap/20090313/ap_on_go_pr_wh/obama_economy

3. http://www.iht.com/articles/2009/03/13/business/yen.php

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