One Response to “Simple Math”

1. Stephen J. Schoonmaker Says:
   November 19th, 2008 at 5:22 am

   Your organization does not understand the real significance of buying the T-bills. As I have stated many times, it is the manipulated (”pegged”) currency markets that form the basis of the protectionism (and the treason of our business and finance leaders) that makes Asian “quality” possible. Japenese cars are better, but they should cost alot more.

   Currency rates (the dollar vs. the Korean, Japanese, and Chinese money) are exactly like tarriffs. If the dollar falls by 50% against the yen, all Japanese cars (including the ones that are merely assembled here) go up in price immediately. You need to tell people this. We could make our dollar fall, if we wanted to.

   Why would one decide that one currency is better than another? If you think about lending money to someone, you want to get more from them, so you want a high interest rate. You can research and find that when a country’s interest rates (such as the Fed rates) are high, then the currency does “well”. So we should want low rates (to make imports expensive). People want to own T-bills because they are supposed to provide a good return. If, however, your country has interest rates that are low (Japan even makes them NEGATIVE), then you would not want that currency. You believe you will get less money back. And, if you think of inflation being constrained by high rates, and if you are buying and selling currencies, then again you want T-bills since we keep the rate high. And, when people talk about T-bills (US borrowing) being safe, then they again are looking for a country “backing” the investments, and people think the US goverment “backs” them.

   However, here’s the thing. The US gov’t does not back them, really. We’ll never pay off 10 trillion dollars (and its going up at a rate of 2 trillion per year now). People should be dumping dollars, the dollar should get cheaper, then our factories will be cheapest producers, and we’re back in business (although not exporting more since Asians will never buy consumer goods from us; you will see “real” tarriffs emerge immediately if the dollar does really fall). It will mean inflation, but in time, our industrial base (cleaner and safer than anything in Asia) will return and we can be prosperous again.

   So, why is the dollar still strong, so Asian stuff is still cheap? There muse be someone buying the T-bills (producing artificial demand for them). Now, read your article.

   You can probably plot the Asians buying T-bills (Koreans, Japanese, and Chinese are all doing it together) and how their currencies stay weak against the dollar as they do this. They buy T-bills by the trillion, the dollar stays strong, their factories hum along, we buy their stuff (using the money they lend us), we close our factories, we lose any knowledge or infrastructure to manufacture (and engineers like myself are a dying breed, I assure you). Then we do absolutley nothing when they blow our satellites from the sky and tell us to retire the USS George Washington carrier task force “or else” Walmart gets nuthin’ (superpower status is what the Chinese really want). We buy the chips and the ships from Asians (I know that the latest missile frigate from the West Coast was designed and manufactured in Korea - basically assembled here). And even if we want nuclear power plants, we will either hire the French, Indians, or Chinese (ultimate Communist irony). Westinghouse is dead. I don’t think Babcock & Walcox still exists. GE is really just doing joint ventures with French.

   Everything would change if the US government merely stated it was going to pursue a weak dollar policy, and that it would prevent any more foreign companies taking over our companies (if we have any more left). The world will freak, but too bad. If you really want to have a strong nation with a future of exploring the universe in freedom and excellence, then there is no other choice. We must stop just seeking money; let’s actually try to accomplish something. With unionized factories, no stinking foreign trade, most women at home raising children like me, only a few computers, and alot of work and courage we actually did send human beings to another planetary body 40 YEARS AGO!