Fears of dollar collapse as Saudis take fright

[Fish]

http://www.telegraph.co.uk/money/mai...cnsaudi119.xml

Fears of dollar collapse as Saudis take fright
By Ambrose Evans-Pritchard, International Business Editor
Last Updated: 8:39am BST 20/09/2007

Saudi Arabia has refused to cut interest rates in lockstep with the US Federal Reserve for the first time, signalling that the oil-rich Gulf kingdom is preparing to break the dollar currency peg in a move that risks setting off a stampede out of the dollar across the Middle East.
China threatens 'nuclear option' of dollar sales

Ben Bernanke has placed the dollar in a dangerous situation, say analysts

"This is a very dangerous situation for the dollar," said Hans Redeker, currency chief at BNP Paribas.
"Saudi Arabia has $800bn (£400bn) in their future generation fund, and the entire region has $3,500bn under management. They face an inflationary threat and do not want to import an interest rate policy set for the recessionary conditions in the United States," he said.
The Saudi central bank said today that it would take "appropriate measures" to halt huge capital inflows into the country, but analysts say this policy is unsustainable and will inevitably lead to the collapse of the dollar peg.
As a close ally of the US, Riyadh has so far tried to stick to the peg, but the link is now destabilising its own economy.
The Fed's dramatic half point cut to 4.75pc yesterday has already caused a plunge in the world dollar index to a fifteen year low, touching with weakest level ever against the mighty euro at just under $1.40.
There is now a growing danger that global investors will start to shun the US bond markets. The latest US government data on foreign holdings released this week show a collapse in purchases of US bonds from $97bn to just $19bn in July, with outright net sales of US Treasuries.
The danger is that this could now accelerate as the yield gap between the United States and the rest of the world narrows rapidly, leaving America starved of foreign capital flows needed to cover its current account deficit - expected to reach $850bn this year, or 6.5pc of GDP.
Mr Redeker said foreign investors have been gradually pulling out of the long-term US debt markets, leaving the dollar dependent on short-term funding. Foreigners have funded 25pc to 30pc of America's credit and short-term paper markets over the last two years.
"They were willing to provide the money when rates were paying nicely, but why bear the risk in these dramatically changed circumstances? We think that a fall in dollar to $1.50 against the euro is not out of the question at all by the first quarter of 2008," he said.
"This is nothing like the situation in 1998 when the crisis was in Asia, but the US was booming. This time the US itself is the problem," he said.
Mr Redeker said the biggest danger for the dollar is that falling US rates will at some point trigger a reversal yen "carry trade", causing massive flows from the US back to Japan.
Jim Rogers, the commodity king and former partner of George Soros, said the Federal Reserve was playing with fire by cutting rates so aggressively at a time when the dollar was already under pressure.
The risk is that flight from US bonds could push up the long-term yields that form the base price of credit for most mortgages, the driving the property market into even deeper crisis.
"If Ben Bernanke starts running those printing presses even faster than he's already doing, we are going to have a serious recession. The dollar's going to collapse, the bond market's going to collapse. There's going to be a lot of problems," he said.
The Federal Reserve, however, clearly calculates the risk of a sudden downturn is now so great that the it outweighs dangers of a dollar slide.

[Skybird]

Oh, no longer a "magic cheque-book"? (see: R. Newman: A history of oil)

[bradclark1]

China threatens 'nuclear option' of dollar sales

Isn't this like a serious threat? (showing my economic ignorance)

[SUBMAN1]

I'd like to call this a 'dollar correction' that is long overdue.

-S

[Rockin Robbins]

The strength of the American economy is much more than the strength of the American government. Also the interdependence of world economies makes such offensive economic warfare more dangerous and costly to the attacker than the defender. America can afford losses on a scale unimagined by the world. That was the lesson of WWII. Pity it has been forgotten.

Wishing for the weakening of the US is understandable. Actually working to produce it is working against one's own best interest.

[Skybird]

Originally Posted by bradclark1

Isn't this like a serious threat? (showing my economic ignorance)

Last time this Chinese option was mentioned in a thread, some months ago, some people were even laughing. I wondered why, and still do so.

every bubble travels upwards to the surface, and when reaching it, it bursts.

[Skybird]

Originally Posted by Rockin Robbins

The strength of the American economy is much more than the strength of the American government. Also the interdependence of world economies makes such offensive economic warfare more dangerous and costly to the attacker than the defender. America can afford losses on a scale unimagined by the world. That was the lesson of WWII. Pity it has been forgotten.

Wishing for the weakening of the US is understandable. Actually working to produce it is working against one's own best interest.

Not often I disagree with a posting so totally and completely!

In a short while, China will be almost unattackable by economical means, and not few analysts would claim that it already is right now. It is autark concerning all goods that are needed by the population to survive, especially food production, agriculture. and if it ever starts to get rid of it epical, monumental, biblical dollars reserves, that will a.) deliver a direct blow to the US economy and finance markets that the US has nothing to defend against and cannot compensate, and b.) it will cause a global avalanche of dollar sales that will increase the American catastrophe even further. since some years, I consider the American willingness to allow this massive vulnerability to grow over so long time to such ridiculous peaks as maybe the greatest strategical mistake in all it's history. I say that without any malicious joy, since that desaster for the US will cause massive disturbance for the european and especially the export-heavy German economy as well. but instead of adressing this lethal weakness, america ignores it and carries on with business as usual, obviously assuming that all nations worldwide will continue to invest into the american capital market for the rest of all time - no effort to seriously consider a strategy to counter this monumental thread. Instead a yelling "Weiter so!".

The Chinese play it silent, and politely. but their determination is as adamant as that of any Western power - maybe even tougher.

What can America do if the Chinese decide to get rid of their dollars (why do you think they have accumulated them so patiently if not as a possible weapon and threat against the US...???). In short: it can do nothing. there is no military option that could be in any way "won", and there is no economical response to counter that move, or to retaliate. That simple. China is unattackable, due to its vital autarky, and its geographical size, the ongoing modernization of it's huge forces, the alreayd great poential of it's navy (that I consider to be constantly underestimated), and the simple fact that it has nuclear bombs and missiles. Sorry to have hurt your egos. The only thing that seriously works against them is demographics. Sounds queer, but the one-child-policy is producing the unwelcomed late effect of an over-aging population.

[SUBMAN1]

Originally Posted by Skybird

Not often I disagree with a posting so totally and completely!

In a short while, China will be almost unattackable by economical means, and not few analysts would claim that it already is right now. It is autark concerning all goods that are needed by the population to survive, especially food production, agriculture. and if it ever starts to get rid of it epical, monumental, biblical dollars reserves, that will a.) deliver a direct blow to the US economy and finance markets that the US has nothing to defend against and cannot compensate, and b.) it will cause a global avalanche of dollar sales that will increase the American catastrophe even further. since some years, I consider the American willingness to allow this massive vulnerability to grow over so long time to such ridiculous peaks as maybe the greatest strategical mistake in all it's history. I say that without any malicious joy, since that desaster for the US will cause massive disturbance for the european and especially the export-heavy German economy as well. but instead of adressing this lethal weakness, america ignores it and carries on with business as usual, obviously assuming that all nations worldwide will continue to invest into the american capital market for the rest of all time - no effort to seriously consider a strategy to counter this monumental thread. Instead a yelling "Weiter so!".

The Chinese play it silent, and politely. but their determination is as adamant as that of any Western power - maybe even tougher.

What can America do if the Chinese decide to get rid of their dollars (why do you think they have accumulated them so patiently if not as a possible weapon and threat against the US...???). In short: it can do nothing. there is no military option that could be in any way "won", and there is no economical response to counter that move, or to retaliate. That simple. China is unattackable, due to its vital autarky, and its geographical size, the ongoing modernization of it's huge forces, the alreayd great poential of it's navy (that I consider to be constantly underestimated), and the simple fact that it has nuclear bombs and missiles. Sorry to have hurt your egos. The only thing that seriously works against them is demographics. Sounds queer, but the one-child-policy is producing the unwelcomed late effect of an over-aging population.

Thats about the biggest underestimation I have read yet. AMerica can rebound, especially since it doesn't have the Chinese problems. China knows this and knows that we are married at the hip at the moment. Chinese cannot sustain their economy either, especially due to its overaging population. THere is a whole thread on that in this very forum. China's got big problems so any economic fight will end up with them as the ultimate loser, and America will go about its business and regain strength eventually.

-S

[SUBMAN1]

Some light reading:

Easy to confuse the commitment of one nation to another for an act of friendship. As mid-19th century British Prime Minister Lord Palmerston once commented, nations don’t have friends; nations have interests. The mutual interests of China and the U.S. are the kind that kept the U.S. and the Soviet Union from going at each other with nukes during the Cold War.

China and the U.S. are running inter-dependent bubble economies, relying on the economic equivalent of Mutually Assured Destruction (M.A.D.) to keep one from blowing up the other’s economy. Whether by intent or accident, sooner or later market forces will assert themselves and both economies will go through tough transitions. How will the world look after that?

The Set-Up

The U.S. and China are have distinctly different bubble economies. The Chinese bubble economy runs mostly on credit and corruption, like the Japanese bubble economy of the late 1990s except more extreme.

Although the PRC has made some progress toward achieving other characteristics of successful market economies, the PRC retains many of the detrimental characteristics of command economies. In particular, the PRC’s four major state owned banks and other depository institutions have extended too many questionable loans to the state-owned enterprises and the state-influenced enterprises based on industrial policy, guanxi (i.e., connections) with government officials, or outright corruption. Along with below-market interest rates and distorted prices, non-market lending has sustained the PRC’s unusually high rate of investment in capital assets (i.e., equipment, software, and structures) of 43.6 percent of GDP in 2004. In turn, this high investment rate has boosted the PRC’s real GDP growth rate to 9.5 percent in 2004. However, many state-owned enterprises and state-influenced enterprises are unprofitable. Protected through guanxi from bankruptcy and foreclosure, many state-owned enterprises and state-influenced enterprises are either unable or unwilling to service their debts. Consequently, non-market lending has saddled the PRC’s four major state-owned banks and other depository institutions with enormous portfolios of non-performing loans. Private economists estimate that the cost of resolving the PRC’s bad loan problem would be about 40 percent of the PRC’s GDP. Non-market lending encouraged the state-owned enterprises and the state-influenced enterprises to invest in too many capital assets and the wrong types of capital assets to produce goods and services to satisfy market demand. The eventual liquidation of the resulting overinvestment or malinvestment poses a significant long-term risk to the continuation of the PRC’s economic growth. Given the PRC’s integration with the global economy, a significant slowdown or recession in the PRC could diminish the prospects for economic growth in the United States and other countries around the world.

Chairman Jim Saxton (R-NJ)
Overview of the Chinese Economy
Joint Economic Committee, United States Congress, July 2005

The U.S. bubble economy, as explained in The Big Bet is heavily dependent on speculation in financial assets.

The U.S.-centric global speculative financial system continues to operate as a kind of perpetual motion machine, propped up by the "moral hazard" of central bank policies and the willingness of foreign lenders to support U.S. consumption on credit, in order to fund their own economic expansion at home via export income and domestic savings.

As long as the global system works this way, profit incentives, asset markets, and resource allocation will remain distorted. The system will continue to reward speculators with great wealth while it offers scraps to the inventors. The U.S. educational system will cater to speculators, who pay the endowments, and ignore the inventors, who can’t give them as much money.

After more than 25 years of this, is it any wonder that the entire U.S. economy has organized itself to conform to this financial model: a gigantic, risky, one-way bet that uses trillions of dollars of credit and massive leverage, relying on the savings of foreign workers to fund the bet and foreign central banks to cover the risks?

To keep its credit-corruption economy going, China’s ruling party, the CCP, needs the U.S. to buy Chinese exports at a rate that keeps its economy growing fast enough to keep its new entrepreneur class growing and supporting the regime. If they fail, the CCP loses their core political support base.

Meanwhile, the U.S. needs cheap imports from China to balance out the inflation created by its asset-speculation based economy. Lacking cash savings, U.S. consumers cannot buy Chinese exports except with credit. To get access to credit, U.S. consumers need low interest rates. Thanks primarily to China now, and Japan and the UK in the recent past, purchases of U.S. treasury debt keeps U.S. interest rates low, allowing North Americans to re-finance their homes to free up cash to pay for hammers and nails at Made in PRC.

Low cost labor is one reason why Chinese exports are cheap. The wage rate for the average GM factory worker is about $74 per hour versus $3.50 for a factory worker in China, where they are are more than 100 auto companies in operation. When Chinese cars start to hit the U.S. market in volume in a couple of years, they will be comparable to Korean cars today but at two thirds to half the price if the current exchange rate between the Chinese currency, the Renminbi (RMB), and the U.S dollar hold. This is the most important factor keeping Chinese exports cheap for North Americans; an exchange rate that favors Chinese exports. U.S. officials say the RMB is too cheap. The Chinese say the problem is not enough saving in the U.S. Both assertions are true. Fact is, that in addition to indirectly supplying U.S. consumers with the cash and credit needed to buy Chinese stuff, the CCP’s purchases of U.S. treasury debt also strengthens the dollar because every time the CCP buys U.S. treasuries they need to convert RMB into dollars. This help keeps demand for dollars high and the dollar strong. That helps keep Chinese goods inexpensive priced in dollars.

The Stand Off

As the political heat over jobs due to Chinese imports rises in Congress, the U.S. threatens China with trade sanctions and tariffs if the CCP does not let the RMB increase in value to make U.S. exports more competitive. It’s generally believed by members of Congress that the RMB is undervalued by about 40%. But if China actually does as the U.S. asks, U.S. interest rates will increase, the U.S. housing market will decline in earnest and the asset-speculation based U.S. economy may go into a tailspin. China counters by threatening to stop buying U.S. treasuries at the same torrid pace if the U.S. slaps tariffs on Chinese goods. But if the CCP actually carries out this counter-threat then exports to the U.S. decrease and China’s credit-corruption bubble economy may go the way of the Japanese bubble economy in 1991.

An economic version of M.A.D. keeps the two co-dependent bubble economies “in balance.” Will economic M.A.D. work as well as the nuclear version?

The Chinese government is a totalitarian capitalist regime that has over the past several decades evolved from a communist into a capitalist totalitarian state. With the notable exception of perennial hawk Michael A. Ledeen, writing for the Wall Street Journal in 2002, few have stated this in public, and you will never hear it out of a member of the U.S. Congress for two reasons.

The first is obvious: the U.S. counts heavily on China for purchases of U.S. treasury debt to fund outrages fiscal deficits (PDF File) and for cheap imports to balance out strong inflationary forces within the U.S. asset-speculation economy that show up dramatically in commodities like oil that must be imported and in non traded goods and services, such as health care and education. To enable politically popular “Something for everyone!” government spending and support the “Every ticket is a winner!” asset-speculation economy, the U.S. relies on a country that increasingly puts political dissenters in concentration camps, shoots villagers who dare stand up to corrupt local politicians who confiscate their land, and jails anyone who offers even mild criticism of the government. This dependency eliminates the incentive for the U.S to get its fiscal house in order, put an end to reliance on asset-speculation for economic growth, and make a principled choice to not finance a totalitarian regime that continues to move away from the principles of liberty and freedom on which the U.S. was founded.

The second reason given for engaging versus shunning the CCP is that a policy of engagement is expected to lead to greater democratization of China. By doing business with the CCP, the U.S. is encouraging capitalism and trade. This will eventually lead to greater democracy in China. If the CCP does not increase personal freedoms to meet the demands of the nation’s burgeoning entrepreneur class, growing political instability will force the change. All these newly minted capitalists will press for personal liberties to match their economic liberties. The old – literally -- leadership will die off to be replaced by younger, more democratic minded leaders who grew up immersed in Western ideas of democracy and freedom. This line of reasoning is justified with research that shows that the more a country is involved in trade, the more likely that country is to address human rights and other social issues.

This is a politically convenient confusion of correlation with causation. Capitalism and trade may correlate to greater political freedom but does not necessarily cause it. The institutions of democracy do not grow naturally from the mechanisms of trade. A strong political class has to build them with outside help. How about China's new middle class and wealthy capitalists? Not likely. The credit-corruption system is making them rich. They are not motivated to rock the boat, especially when doing so can land you in prison.

As Ledeen pointed out in his WSJ piece, “It is… wrong to think of contemporary China as an intensely unstable system, riven by the democratic impulses of capitalism on the one hand, and the repressive instincts of communism on the other. Fascism may well have been a potentially stable system, despite the frenzied energies of Hitler's Germany and Mussolini's Italy. After all, fascism did not fall as the result of internal crisis; it was destroyed by superior force of arms. Fascism was alarmingly popular; Hitler and Mussolini swept to power atop genuine mass movements, and neither Italians nor Germans produced more than token resistance until the war began to be lost.”

How does it end?

Dangerous as it was, M.A.D. nuclear policy worked. There were a couple of close calls, but no nuclear war between the U.S. and the Soviet Union. The U.S. and the Soviet Union developed communications methods and checks and balances to help prevent accidents. Luck played a big part. The U.S. applied the economic screws on the U.S.S.R., raising the costs of military confrontation until the Soviet economic system failed, which was inevitable in any case.

The current economic version of M.A.D. between the CCP and the U.S. may turn out to be as lasting and positive for the U.S. as nuclear M.A.D. was between the U.S. and the U.S.S.R. but for three major differences. Capitalism has made the CCP wealthy and powerful, supported by a large and growing capitalist class, whereas socialism brought the Soviet Union’s leadership to ruin, a lesson not lost on the CCP. Maybe free trade makes democracy more likely in China but shoveling U.S. capital assets and productive capacity into China and increasing dependency on China’s capital and labor to fund America’s fiscal profligacy and economic dysfunction takes away U.S. leverage to press the CCP for social reforms. Either bubble economy may go through a crisis for reasons neither country either expects or desires, but that doesn’t mean such a crisis might not be instigated by one that foresees an end-game advantage.

If the brewing confrontation between Iran and the U.S. breaks out into open hostilities the result will be a spike in oil prices and interest rates in the U.S. The asset-speculation economy will take a major hit. How will China’s credit-corruption economy fare? China has oil and gas deals with Iran and it has been credibly asserted that the CCP played a role in the election of Iran’s current anti-U.S. leadership. The CCP also has oil deals with an increasingly dictatorial Russia and overtly anti-American Venezuela. When the dust settles after a possible a U.S./Iran crisis, China winds up with oil, enormous productive capacity and trade partners across Asia, South America and Europe. And what does the U.S. have?

[Letum]

If you really want to piss off the American economy, just start trading Oil in Euros.

Since OPEC announced that all oil trading would be done in US$ in the 1970s(?) the
American economy has been laughing.
Everyone needs to convert to US$ to trade oil and this means that oil prices are
never bad against the US$ and it means America has a easy time selling UD$s.

Then Iraq decided to trade oil in euros. Everyone thought Iraq was shooting it's self
in the foot because this meant no trading with OPEC and less profit per barrel selling
to almost all other currencies, but then the Euro went up 15%+ against the US$ and
suddenly Iraq was making big money.

Iran, Venezuela and Korea see the big profits Iraq is making and also switch to Euros
for oil trading.

OPEC starts to get worried that other countries will switch to Euros for oil trading.
OPEC prepares to switch to Euros as well so that it does not lose out on the profits.
This worries America a lot. If OPEC switches to Euros it will mean a end to the happy
times and a big devaluing of the US$.

BUT

Just as things are looking grim for the American economy Iraq (the first country to
trade in Euros) is invaded by America. The message is loud and clear; trade in Euros
and feel America's wrath.
Countries cancel plans to switch to Euros and the heat is taken off OPEC who
continue to trade in US$. The American economy is saved.
Too bad about the death and destruction etc.

[Rockin Robbins]

Europe is no place to look for economic widsdom. What they mistake as a M.A.D. strategy is in reality co-dependency, which operates for the good of all. The presence of defects does not invalidate a process. There were plenty of defects in the German WWII submarine plan. The process was brilliant. The execution was admirable. It's defects were fatal.

A capitalist economy, because it relies on the interdependence of people operating in their own self-interst is resilient, simply because it has so many independent contributers to the system. It is loss-tolerant, operates above logic (what works, works, almost randomly tried), optimizes allocation of resources and allows universal opportunity to leave class boundaries because it is a meritocracy. In the US, we are learning how much stronger and more beneficial is the private economy than government manipulation. So long as government confines its actions to eliminating fraud, ensuring that opportunity is not denied for reasons of race, creed, or religious belief, runs the police force and the military, it is doing its job. Competing or eliminating business is just tyranny. Economic rights are as important as personal rights. Individual rights to life, liberty and property are the center of public good.

[Skybird]

Exactly, Leturm. And not just since Robert Newman included it in his show

Subman, I have given up to tell Americans that their economy is very fragile and depending on eternal pumping foreign finances into it'S system, which simply will stop one day, one way or the other, and probably earlier than later. Practically all of the major Arab oil producers in the past two years have thought loud in public about turning from dollars to Euros concenring their oil deals, and only intimidation and lucrative weapon deals - deals with some of your and our most unforgiving and determined enemies: figure where this stupidity will lead us - have kept them from getting serious about it. China you cannot dictate anything anyhow, their reserves hang like a damocles sword over your country - that's why they collected them in all silence, and with patience while you were sleeping and asked for another luxury good. You overestimate their economical vulnerability tremendously.

This is not the WWII era anymore, American economy is not strong by itself, but heavily depending on nobody ever touching the status quo of infinite foreign money transfer into your system, which is, if you only look honstely at it, a very stupid and wasting way of economical business. But trust is fading, and revenues for foreign investors become more and more a question mark, due to your fantastic deficits and debts with all the consequences coming from that, substantially as well as psychologically.

Or to put it all short: you are extremely vulnerable, and do not want to realize it.

So I just sit and hold my mouth and watch you crazy people racing against the concrete wall with your eyes wide shut, sicne you will not listen to others anyway (like always, it seems). but don't dare to complain afterwards that nobody warned you. Outside the US, there are not really just few voices predicting exactly this scenario,and warnings of investing into greater and greater parts of the American market since quite some time now have found entrance into the customer briefings of bansk and investement institutions in Europe - your repuation is noi lponge rbeyond dohbt, the trust your finacial power once enjoyed, is decreasing. If you think the light (!) symptom of the recent mortgage problems are the heart of the expected storm,and the better part of it already is over, then I tell you different - it is just a soft and gentle pre-vibration to the earthquake your unhealthy finances are heading for. Think of it as the deep breath before the storm, and it will come in one year, or two, or five, but it is constantly gathering. You can't eternally live on tick and expect that everybody gets fooled and joins you for his - imagined - own interest forever. Currently you try to talk everybody to join you in the trap you are in, hoping that if he sits with you inside of the trap, he will not turn against you for self-interest. But there are more and more signs that this cheat has worked for the longest time. From Southamerican rebellious spirit over the strong Euro to the growing doubts about the currency for oil deals in the Arab sphere, and finally the rise of China: the signs are there that you may need to excpect to get massively hit sooner than you may fear. It is only a question of time until someone not meaning well with you anymore, or not trusting in the bubble anymore, calls your cards - and then you see that bluffing alone does not really beat a good hand. And the Chinese hold the strongest cards, followed by Europe.

interestingly, all economies of the major powers and empires of the past 2500 hundred years, from Athens over Rome to the european powers, suffered from this very same mistake and arrogance: to allow to centralize all flow of goods and finances and steer this stream of luxury into the heartland of the empire, by that enjoying the luxury from that - but at the same time becoming more and more dependant from the outside and the perimeter of the empire, from that becoming financially and often economically weak and weaker, and from that loosing more and more degrees of freedom to act - in case of several European powers in the past 500 years needing to reboot their finance systems from zero (Spain, Holland, France). You repeat the very same mistake that several times have been demonstrated by other powers before!

[Letum]

Originally Posted by Skybird

Exactly, Leturm. And not just since Robert Newman included it in his show

Apocalypso Now
You have good taste!
Im suprised Rob never mentioned that OPEC considerd switching to Euros.

First time I've shown the slightest intrest in global economics.
I really should look at it more, but it is such a steep learning curve.

Got this on my reading list for now in the hope that it won't be too heavy.

[Skybird]

Originally Posted by Rockin Robbins

Europe is no place to look for economic widsdom. What they mistake as a M.A.D. strategy is in reality co-dependency, which operates for the good of all. The presence of defects does not invalidate a process. There were plenty of defects in the German WWII submarine plan. The process was brilliant. The execution was admirable. It's defects were fatal.

A capitalist economy, because it relies on the interdependence of people operating in their own self-interst is resilient, simply because it has so many independent contributers to the system. It is loss-tolerant, operates above logic (what works, works, almost randomly tried), optimizes allocation of resources and allows universal opportunity to leave class boundaries because it is a meritocracy. In the US, we are learning how much stronger and more beneficial is the private economy than government manipulation. So long as government confines its actions to eliminating fraud, ensuring that opportunity is not denied for reasons of race, creed, or religious belief, runs the police force and the military, it is doing its job. Competing or eliminating business is just tyranny. Economic rights are as important as personal rights. Individual rights to life, liberty and property are the center of public good.

From the idealistic textbook for capitalists. the realitylooks far more brutal and inhuman, and sees qwidening gaps and sharpening contrasts between the benefitting rich, and the exploited poor. Truith ios that capitalism is not for the people. It only is for the strongest, and enslaves the weak. Socialdarwinism at its best. for civilised, self-aware being like us hmans, it should not be good enough. And the abuse is the rule, and is massive - if only you open your eyes. In the end, how could a purely materialistic ideology not accepting other, non-material qualities as well, be of benefit for mankind, ever? It is not by random chance that the social rifts and widening gaps between the haves and have-nots are so rapidily increasing. In Germany we have reached a state now where a critical number of people work full time - but can't make a living from working for that company. they can't accumulate reserves for when getting old anymore. It is a social bomb building. At the same time, whilke always comlaing how bad and expensive it all is, Key corprorations since over 15 years claim one record profit after the other, with manager wages being beyond good and evil and claiming rises of 50% when at the same time firing workers and demanding others to work more for less wages. It is a brutal everybody-eats-everybody, and the strongest exploiter wins it all. Europe since years has stepped onto the American trail in this negative example, and we must not be proud of doing so.

Leave it to the market forces alone, and you get brutal egoism in its purest form. control everything by law, and regulate all via the state, and you suffocate most economical creativity. Truth is: you need a bit of both if you want an economy serving the interest of all people in a fair manner, and not just the rich predators on top, at the cost of the slaves at the bottom. this is what in europe originally was understood as "social market economy". But liike capitlöaists exaggerate the non-regulation, all poltical parties also exaggerate the regulation, for their own power interest. Corruption and monopole-building has been the consequences. And in the end a total distortion of the socalled free market. If you look at the protection schemes of both the US and the EU against south america and Africa, you know that the free market alway has been nothing more than an illusion, hiding the exploitation of the weaker nations. And this goes on until today.

[Skybird]

Originally Posted by Letum

Apocalypso Now
You have good taste!
Im suprised Rob never mentioned that OPEC considerd switching to Euros.

Didn't he? Not remembering it all word by word - at least he indicated it, it seems to me. but I could be wrong. I have it on CD, sooner or later I will watch it again. It's brilliant - and so damn true.

First time I've shown the slightest intrest in global economics.
I really should look at it more, but it is such a steep learning curve

I recommended it in the years before, and recommend it once again: Paul Kennedy - The Rise and Fall of the Great Powers. Economical change and military power 1500-2000.

A brilliant, thick (1000 pages in German) and very readable study on the interaction between finance system, economy, and military history in Europe and America. I have finsihed reading it a second time this Spring- and again found it most rewarding and enlightening.