An Ol' Broad's Ramblings
Archive for Economy
Tax and SPEND SPEND SPEND!
Most people, when they get to the end of their paycheck, do without. Not our Congress! Nope! They believe that since it’s not their money they are spending, and don’t have to work hard to earn it, they can do what they damn well please. Well, guess what ya free spending scum bags….WE CAN’T AFFORD YOU! Perhaps it’s time for WE, The People to put them on a strict budget. NO PAY! NO PERKS! If they want to serve in Congress, then that’s what they’ll do…SERVE….not be served! That goes for the free spending POTUS as well. NO more lavish parties! NO more flitting about the world on expensive vacations. NO more day trips to campaign! ENOUGH!!
They have turned the citizens into slaves, working for THEIR pet projects, and doing NOTHING to earn the privilege. The intent of Congress is to serve in the best interest of THE PEOPLE. That no longer is true, and it breaks my heart to see what this country has become due to the hateful partisanship.
We have a POTUS that has pretty much destroyed the work of thousands of civil rights advocates over a long period of time in just a few short years, and divided this country in ways I haven’t seen since I was quite young. We have a Congress that undermines anything good that MIGHT be accomplished, on BOTH sides of the aisle. And we have a split between the haves, that work hard to succeed, and the have nots, who believe they are entitled to what they did not earn. About half the country pay no taxes, and the other half pay all of the taxes that support both those who won’t work, and a Congress that is barely functional, with all their grand USELESS ideas.
I can hear it now…. “I do too pay taxes!” If you get a refund of the income tax taken out of your check, plus earned income credit, plus Lord knows what else, no…you don’t. We have about 47% of the population not really contributing, and 539 individuals that are spending everything, PLUS trillions, that comes into the coffers. Where is the logic???
STOP THE SPENDING! NOW!
Ready for Another Debt Limit Fight?
Amy Payne – The Foundry
Yes, it’s time to talk about the debt limit again.
Every time the U.S. bumps up against its debt ceiling, we start the cycle all over again. President Obama insists he won’t negotiate over the debt ceiling, but of course he will. Members of Congress grandstand about changing this vicious cycle, and then most clamber for the easy way out so they can return to matters they’d rather talk about, which is just about anything but cutting spending.
Meanwhile, federal spending continues its out-of-control expansion, and the debt clock keeps ticking.
We will hit the debt limit again on May 19. Treasury is expected to exhaust its cash management tools sometime in September or October. In the meantime, Washington’s periodic debt ceiling ritual will play out. Whatever happens, the debt limit should not be raised unless we are put on a path to balance the budget in 10 years. That’s the bottom line.
They Are NOT “Unlawful Immigrants”
They are criminals! Illegal invaders, totally disregarding our laws, not caring about the damage done to our economy. I won’t even bring up the many deaths attributed to them.
If a person wants to become an American, then they go through the proper channels. If they want to bring their third world country standards and ‘values, then so many sneak across the border, or overstay their visa, or however they manage to get here. I don’t believe all those who they are trying to give amnesty to want to be Americans. Some, maybe. But when you see these illegals protesting in our streets, carrying foreign flags, do you really think they want to BE Americans? No! They want the SPECIAL rights and privileges the government is trying to give them.
Congress never seems to read the bills they shove down our throats. They never understand the ramifications of all their feel good legislation. Is it any wonder that only 5% believe Congress represents the best and brightest of our country? We are already so far in debt, the thought of adding $6.3 TRILLION more to that debt is just insane!
Congress and the POTUS need to step back, and for ONCE, use the gray cells God gave them! I, for one, do not believe any of them represent the majority of LEGAL citizens.
New Heritage Study on the Cost of Amnesty
Amy Payne – The Foundry
The immigration debate is about to get a lot more concrete.
Lawmakers need to be honest about the cost of their proposed immigration plans—and a new study due out today from The Heritage Foundation calculates the cost to taxpayers of granting amnesty to unlawful immigrants.
Reality Check – The Economy Sucks!
If I hear one more time from that jackass in chief, or his clown side kick, how much better the economy is doing, we might have to get a new TV. Yeah, for them, the economy is terrific….they having a high ol’ time, spending OUR money. But out here in the real world, people are hurting!
Sure, they show the ‘official’ unemployment rate at 7.7%. But that doesn’t tell the REAL story. Take a gander at this map. Find your county, see how many people are on food stamps. There isn’t a county in this country that doesn’t have folks on food stamps. And many areas of the country have a LOT of people who are in need. No doubt, there is a great deal of fraud, but still, those who have given up looking for work, and have fallen off the ‘unemployment’ roster, ARE in need. In need of a job that just isn’t there for them. The real unemployment rate is 11.6%, and I suspect even that is still too low.
With the outrageous costs of Obamacare (which members of Congress now believe they shouldn’t have to endure), the thousands upon thousand of new regulations, businesses closing their doors for good, the cost of food rising at an alarming rate, how can they stand there, with a straight face, and tell us the economy is improving. No, it is not, and I, for one, would appreciate if the blatant lies would cease. I suspect Congress’ approval ratings are so low because the Senate is led by one of the most corrupt Majority leaders in my lifetime. The House has worked hard for solutions that are never brought to the Senate floor because of him, and he takes his marching orders from the POTUS. How that man (Obama) has any approval is totally beyond me. I don’t care if he’s ‘likeable’. He’s incompetent! The buck stops with him. So, if you aren’t able to find work, look at the White House, and stop blaming those who DO understand the dilemma.
Most of those in Washington haven’t been in a grocery store in years. They have no idea how difficult it is to make ends meet. They have a guaranteed salary, twice, and in many cases, three times the amount of the average hard working citizen. PLUS they get to travel around the world, all at our expense. I won’t even go into the Obama’s expense account.
It’s time to stop all the ‘distractions’, and get down to the serious issues facing this country today.
Remember the Economy? It’s Still Bad
Derrick Morgan – The Foundry
According to a poll earlier this year, voters have a higher opinion of cockroaches than Congressmen. President Obama’s personal popularity remains solid, but his job approval rating is going down. Why are our elected officials unpopular?
It might just be because they are not listening. In poll after poll, the American people continue to tell Washington that their top priority is the economy. A recent Fox News poll asked participants what is the most important issue facing the nation. The results: the economy got 42 percent, deficit 17 percent, guns 5 percent, and immigration 4 percent.
President Obama inherited a weak economy, to be sure, but his policies, including Obamacare with its costly expected mandates on businesses and the Dodd-Frank financial services regulations have made the situation worse. Even when we see some economic growth, the jobs growth has been feeble. People have been leaving the workforce. Heritage’s James Sherk noted recently, “Labor force participation dropped to 63.3 percent, the lowest rate since 1979..” America needs to get its people back to productive work, not recruit Americans to start taking food stamps.
“….fear the people….”
I’ve highlighted the names of the “gang of eight” so you won’t forget them. If you want to read this bill, also known as JOLT ACT of 2013, you can read the whole text of gobbledy gook here. While there are a few issues that MUST be addressed, and should have been a LONG time ago, the is a lot in this bill that shouldn’t even be considered! At some point, I just might go through the whole 844 pages, and address those, but for now, do your own homework! 
IMHO, they should have made issues addressed in the Congressional Findings (Section 2) THE bill, and left the rest for another time, when we are back on our feet, so to speak.
(1) The passage of this Act recognizes that the primary tenets of its success depend on securing the sovereignty of the United States of America and establishing a coherent and just system for integrating those who seek to join American society.
Our ‘sovereignty’ has become a really bad joke. And as for ‘integrating’? Waving the Mexican, or other foreign flags, DEMANDING ‘rights’, is not integrating. Refusing to learn the language of the land is not integrating. Bringing ‘third world’ habits and policies and insisting WE adapt to YOUR way, is not integrating.
(2) We have a right, and duty, to maintain and secure our borders, and to keep our country safe and prosperous. As a nation founded, built and sustained by immigrants we also have a responsibility to harness the power of that tradition in a balanced way that secures a more prosperous future for America.
Well, our borders are NOT secure, and we are NOT safe. The drug cartels have made themselves quite at home in cities like Chicago, a place where murder is so common place, with some of the strictest ‘gun control’ laws…in the world…it has become a poster child for how NOT to run a city, county….country!
These are the two major issues that should have been addressed, and the rest left to other bills, broken down individually, instead of lumping the whole chit works into one bill. Congress has a real bad habit of throwing in crap, and this bill is no different. Address these issues FIRST. Get the border secured, which will take YEARS, and remove the criminal element from out streets. Shoot the sons of beeches if necessary, but get them away from our children. Does it make sense for a legal citizen, or resident, to fear for their lives every time they walk out their front doors? HELL NO! So, why aren’t those in Washington concerned about US? Because it’s all politics!
No self respecting member of the U.S. Senate would EVER introduce such garbage. Then again, we have no self respecting representatives in the government anymore, and they SURE don’t respect us! WE want our borders secured, immediately, but this is not a priority. WE want our streets safe from criminals, and criminals removed, but this also, is not a priority.
What is the priority? Votes. 11 MILLION new voters, the majority of whom will make sure we continue to lose our God given, Constitutionally guaranteed, liberties by assuring that the Democrats>liberals>progressives>socialists>commies will have a strangle hold on power.
This bill, as is, is something this country can’t afford, financially, or morally. I’ve heard so many spewing on the idjit box how “no one is an illegal person’. Well, they are wrong. Being a person isn’t illegal. Breaking into someone else’s home, expecting them to feed, clothe, take you to the doctor, and pay for all your wants and whims IS illegal, is IS a crime. Handing over the keys to the house is just plain ignorant!
“Former House Majority Leader Dick Armey (R-TX) once noted that three groups spend other people’s money: thieves, children, and politicians—and all three need supervision.” Politicians have shown themselves to be both childish, and thieves. It’s way past time for WE, The People to regain control of our country, and OUR money! Any politician that fails to uphold his/her oath of office should be run out on a rail! WE need to put the fear of God back into them, and the fear of us!
“When governments fear the people, there is liberty. When the people fear the government, there is tyranny.” Thomas Jefferson
American Families Cannot Afford the Cost of Amnesty
Derrick Morgan – The Foundry
Our nation is going broke, and now is not the time to increase burdens on American families.
The Border Security, Economic Opportunity, and Immigration Modernization Act (S. 744)—commonly called the “Gang of Eight bill” after the eight Senators who came up with it, Charles Schumer (D-NY), Dick Durbin (D-IL), Robert Menendez (D-NJ), Michael Bennet (D-CO), John McCain (R-AZ), Jeff Flake (R-AZ), Marco Rubio (R-FL), and Lindsey Graham (R-SC)—includes amnesty for some 11 million unlawful immigrants. That amnesty would further burden taxpayers and weaken our fiscal situation. Congress should not rush to pass the bill without understanding the cost to the American taxpayer, especially when key research identifying and calculating those costs is nearly complete.
We have more than $12 trillion in public debt and tens of trillions of dollars more in unfunded obligations that we have no way to afford, thanks to promises made by past and present politicians. With this in mind, today’s political leaders must consider the fiscal impact of amnesty and a path to citizenship that would enable millions of unlawful immigrants to qualify for costly welfare and entitlement programs.
It’s YOUR Money!
First, we have John Stossel on our public education system. More money for administration, but no improvement in the quality of education. If you ask me, kids are being so dumbed down, they can’t answer simple question about their own country! Oh, they know who won in such and such a season on American Idol, but they have NO idea who fought for their right to be totally oblivious.
Next, we have Tom Sullivan. So, Barack Hussein Obama has decided how much you save for your retirement? YOU earn the money, YOU save YOUR money, but he says no, you can’t save that much, so will take it away from you once you hit that mark. Who gave him the right to say who can retire with how much? NO ONE!
And, on that note…. I have things to do today!
BREAKING NEWS: OBAMA LIES!
Oh, wait…that’s not news. Sorry. Got carried away!
The media won’t expose the truth, so many will continue to believe his lies….about the budget, about Benghazi, about….well, you name it, and he’s lied about it. Is it possible that this narcissist is incapable of telling the truth? I seriously wonder.
I realize politicians lie for a living. This is why most people can’t stand them. We want the unvarnished truth, whether we like it or not. Just tell us the truth! We aren’t children, we are capable of making our own decisions about each issue. And we are smart enough to know that this continuous spending spree can NOT be sustained! Well, at least us grown ups do. The low/no information voters, those ‘you owe me’ types, will not care that their children and grandchildren are being deprived of a prosperous future. Self gratification has put us on this road, and it’s way past time to put a stop to this freight train, and switch tracks!
Obama’s Fake Budget Marketing Exposed
Romina Boccia and Amy Payne – The Foundry
President Obama is marketing his new budget by saying it has “more than $2 in spending cuts for every $1 of new revenue.” Is this true?
In a word, no.
In fact, his spending increases and advertised spending cuts cancel each other out—leaving only a massive tax increase.
The President cancels sequestration’s spending cuts—therefore raising spending—by the same amount that he reduces spending. When that’s done, all that’s left is a $1.1 trillion tax hike.
- The President increases spending by $1.1 trillion by cancelling sequestration. Sequestration, the automatic spending cuts adopted in the Budget Control Act of August 2011, is already in effect. Thus, cancelling these reductions in spending increases spending by $1.1 trillion over 10 years.
- The President reduces spending by $1.1 trillion. The President lists a number of additional spending reductions based on a December offer to Speaker of the House John Boehner (R-OH). These total about $1.1 trillion and are completely offset by the cancellation of sequestration.
- The President raises taxes by $1.1 trillion. The official total tax increase in President Obama’s budget is available in the Treasury Department’s “Green Book.” Treasury scores the total net tax increase from all President Obama’s tax policies at more than $1.1 trillion over 10 years.
So President Obama’s spending cut claim doesn’t hold up, and Americans get stuck with a $1.1 trillion tax bill. Real math hurts.
Farewell To The Dollar – Part VIII ~ The End is Near (Guest Commentary)
Part I, Part II, Part III, Part IV, Part V, Part VI, Part VII
Farewell To The Dollar (Part VIII)
by The Bunker
The End is Near
The elite status of the U S dollar is coming to an end. Everyday headlines point to that fact. Once again the world’s economies see how irresponsible American politicians handle their economic duties. Here are some quick facts:
- Saudi Aramco the world’s largest oil producer is building the largest oil refinery in the world in the Chinese province of Yunnan.
- The BRICS nations (Brazil, Russia, India, China and South Africa) recently agreed to setup their own central banking system outside of the International Monetary Fund. This would allow them to trade in their own currencies. They collectively control 20% of the world’s GDP.
- Russia and China have been purchasing large amounts of gold. In 2012 China purchased 454.1 metric tons and Russia purchased 570 metric tons. The Former Russian finance minister Alexei Kudrin said that a full-blown economic and financial crisis in the euro zone is inevitable.
- Venezuela, Germany, Ecuador, Azerbaijan, Switzerland, Belgium, Ireland, Netherlands and Romania are asking that their gold be repatriated back to their country’s vaults.
- Currency wars have started. From Yahoo Finance, January 2013:
“Brazil’s government has been very active in its efforts to stem the Real’s appreciation, though capital controls and interventions.
Russia’s central bank deputy chief said yesterday “we are on the verge of very serious and confrontational actions in the sphere…called currency wars”.
EuroGroup chief Juncker recently said that “Europe is no longer willing to be the last economic player holding the toxic parcel of an over-valued exchange rate”.
Bank of England Governor Mervyn King said in December “concern is that in 2013 we’ll see the growth of actively managed exchange rates as an alternative to the use of domestic monetary policy”.
Japan’s new prime minster Shinzo Abe has called for “unlimited easing” by the BOJ.
Bank of Korea Governor stated a couple days back that the nation will take an “active” response on the Won if needed.
Swiss central bank has expanded its portfolio of foreign assets four times in the last three years in its efforts to keep the lid on Swiss Franc appreciation.
China has always been suspected of manipulating its currency, but the country actually allowed its currency to appreciate against the dollar last year. However the new regime in China may not be supportive of Yuan appreciation.
So, which currency will win the race to the bottom?”
Exactly, which currency will survive? When the U S dollar loses its status as the reserve currency the loss of purchasing power will be immediate. The end of the Petrodollar will send trillions of unneeded dollars flooding back to America. Hyperinflation will be the result.
By 2016 China will surpass the U S as the largest economy in the world. By all indications the global economies are getting ready for the transition. Are you?
Batting ZERO
Insanity: doing the same thing over and over again and expecting different results.
Albert Einstein
What can I say about the most incompetent person who has ever occupied the Oval Office? Instead of surrounding himself with advisers with a modicum of common sense, he has people (?) whispering in his ear how brilliant he is, and no matter what he does, the populace will bow down. Pfft!
budg·et
1.an estimate, often itemized, of expected income and expense for a given period in the future.
This is not a ‘budget’. Looking at these five major problems with the budget, I have to wonder if we are all on the same planet, or if Obama lives in a different realm where all is rainbow farting unicorns? Because there’s no way a rational person would cut our defense even more than it has been, decimating our ability to defend our country.
When it comes right down to it, nothing I see in this budget will do ANYTHING to get us back on the road to prosperity. Quite the contrary! It will drag us down deeper into the socialist pit that D.C. has been creating for many years. Our children, grandchildren, and all future generations are now so deep in debt, they may never see the light of day.
5 Things to Know About the Obama Budget
Amy Payne – The Foundry
President Obama finally released his budget yesterday—more than two months late.
Heritage experts immediately went to work analyzing the mounds of new spending on education, manufacturing, “clean energy,” infrastructure, and small business.
But the President didn’t stop at more of the same failed stimulus and Solyndra-type policies. He also piled on the tax increases—including on seniors, the poor, and the middle class.
Five key things to know about President Obama’s budget:
1. It hikes taxes by $1.1 trillion.
Heritage’s Curtis Dubay says: “There was little doubt that President Obama would propose a huge tax hike in his budget. It is a bit surprising, however, that the total tax increase he proposes is almost double what he claims it to be.”
Dubay explains where all the tax increases come from—including the “Buffett Rule,” capping tax deductions, and hiking the cigarette tax and the death tax.
Farewell To The Dollar – Part VII ~ Protecting the Petrodollar (Guest Commentary)
Part I, Part II, Part III, Part IV, Part V, Part VI
Farewell To The Dollar (Part VII)
by The Bunker
Protecting the Petrodollar
Empires survive two ways; by the threat of force or the use of force. The American military can project force anywhere on the planet.
First Iraq War
Iraq invaded Kuwait in August of 1990. The invasion came after a breakdown in talks about the price of oil. Iraq claimed that Kuwait had been selling oil at a reduced price that resulted in lost revenues for Iraq. Old territorial disputes also entered the equation. Both countries sit on the border of Saudi Arabia. The whole area sits on an ocean of oil. Anything that would keep this oil and the petrodollar from flowing had to be stopped. Also, the U S had to keep its end of the bargain with Saudi Arabia. Having two neighbors sparing on its northern border made the Sheiks nervous. The first gulf war began and ended quickly.
By February of 1991 with the retreat from Kuwait of Iraqi forces Saddam Hussein ordered the torching of 700 Iraqi oil wells. This was a final act of revenge. The first Gulf War was about oil and the free flow of Petrodollars.
The Second Gulf War
In a Time Magazine article dated November 18, 2000 came this announcement:
“Europe’s dream of promoting the euro as a competitor to the U.S. dollar may get a boost from SADDAM HUSSEIN. Iraq says that from now on, it wants payments for its oil in euros, despite the fact that the battered European currency unit, which used to be worth quite a bit more than $1, has dropped to about 82[cents]. Iraq says it will no longer accept dollars for oil because it does not want to deal “in the currency of the enemy.”
The switch to euros would cost the U.N. a small fortune in accounting-paperwork changes. It would also reduce the interest earnings and reparations payments that Iraq is making for damage it caused during the Gulf War, a shortfall the Iraqis would have to make up.
The move hurts Iraq, the U.N. and the countries receiving reparations. So why is Saddam doing it? Diplomatic sources say switching to the euro will favor European suppliers over U.S. ones in competing for Iraqi contracts, and the p.r. boost that Baghdad would probably get in Europe would be another plus.”
By 2003 George Bush had convinced the world that Iraq was a hotbed of terrorist activity. Saddam Hussein according to Secretary of State Colin Powell also had an arsenal of weapons of mass destruction.
What Iraq really had was the second largest oil reserves on the planet, second only to Saudi Arabia. The potential for millions of barrels a day being sold in Euro’s and not dollars was the real threat to America’s survival.
The world and especially the Saudi Sheiks would not mourn the loss of Saddam Hussein. The second gulf war began and American forces still protect the oil fields.
Libya
Muammar Gaddafi of Libya had a plan. With gold reserves of approximately 143 tons, plenty of water and 2% of the worlds oil supply he wanted a new African currency. Gaddafi had held several negotiations with other African nations to form a currency union based on the Libyan Dinar. Gaddafi was also advocating dumping the dollar for future trade. Libya was also a completely independent nation operating outside the rules of the International Monetary Fund and the Bank for International Settlements.
By 2011 Muammar Gaddafi was brutally murdered after a short war. As Hillary Clinton laughingly proclaimed about the death of Gaddafi, “We came, we saw, he died.”
One of the anomalies that occurred during the fighting in Libya was the fact that the rebels took the extraordinary step to set up a central banking system. An article in the Asian Times pointed this out:
“I have never before heard of a central bank being created in just a matter of weeks out of a popular uprising. This suggests we have a bit more than a rag tag bunch of rebels running around and that there are some pretty sophisticated influences.”
The Petrodollar survived another small scale attack. There are other larger players on the world stage.
Iran
The world has put monetary sanctions on Iran. The hope was that these binds would suffocate the Iranian economy and force them to the bargaining table. Iran had other ideas. In an article from Reuters dated February, 28 2012 came this statement from the central bank governor of Iran:
“In its trade transactions with other countries, Iran does not limit itself to the U.S. dollar, and the country can pay using its own currency,” central bank governor Mahmoud Bahmaniwas quoted as saying. “If a country should so choose, it can pay in gold and we would accept that without any reservation.”
To understand how important Iranian oil is to the nations of Central Asia and the Far East this story was published by RT News in February of 2012:
“But that was not the end of their attempts, and Iran sought other ways to get around the petrodollar noose. There are rumors that India, which imports 12% of their oil from Iran, has agreed to purchase oil for gold. Energy trade with China, importing 15% of its oil and natural gas from Iran may be settled in gold, yuan, and rial. South Korea plans to buy 10% of their oil from Iran in 2012, and unless Seoul sides with American and European sanctions, it is likely to use gold or their sovereign currency to pay for it. Also, Iran is already dumping the dollar in its trade with Russia in favor of rials and rubles.”
The future will tell how far the U S will go to protect the Petrodollar.
Farewell To The Dollar – Part VI The Petrodollar Empire (Guest Commentary)
Part I, Part II, Part III, Part IV, Part V
Farewell To The Dollar (Part VI)
by The Bunker
The Petrodollar Empire
The modern world needs oil. With the advent of the Petrodollar the world also needs U S dollars to buy oil. This has created the largest empire in world history. Like any empire it must be protected.
When the dollar was pegged to gold it was fairly simple to protect its value. The gold was stored in a huge vault. Congress would balance its budget and America had sound money. You can see how this arrangement put a crimp in the politician’s style.
With the dollar pegged to oil things got a whole lot more complicated. Oh, it was perfect for a political class that loves to spend money. There is seemingly no end for U S dollars and the politicians have the printing press.
How important is the Petrodollar to the U S economy? One of the tricks economists use to make their illusions seem real is something called money velocity. It is the measurement of how many times a currency trades hands. By using a formula this can be turned into a measurement of how healthy an economy is.
Money velocity can be used to pump up the Gross Domestic Product (GDP) of an economy. John Mauldin in an essay titled, “The Velocity of Money” explains it this way:
To give you a very rough understanding, let’s assume a very small economy of just you and me, which has a money supply of $100. I have the $100 and spend it to buy $100 of flowers from you. You in turn spend $100 to buy books from me. We have created $200 of our “gross domestic product” from a money supply of just $100. If we do that transaction every month, we will have $2400 of annual “GDP” from our $100 monetary base.
You can see that by taking Mauldin’s simple example and applying it to the worldwide oil market how beneficial it is for the U S economy. In fact without the Petrodollar America’s debt based economy would collapse.
Farewell To The Dollar – Part V ~ Gerald Ford and Jimmy Carter (Guest Commentary)
Part I, Part II, Part III, Part IV
Farewell To The Dollar (Part V)
by The Bunker
Gerald Ford and Jimmy Carter
Richard Nixon had manipulated the economy to get re-elected. Gerald Ford and his successor Jimmy Carter paid the price.
Even with the new Petrodollar picking up steam around the world the lingering affects of too many dollars back home had to be cleaned out. The wage and price controls had held manufacturers and business’s back. The Federal Reserve had to increase the interest rates to pull dollars out of the economy. Business’s wanted to make up for lost revenue under price and wage controls. The result was Stagflation. The economy slowed and prices rose. Something else was a big contributor, OPEC slowed oil production and the price of oil rose. Gasoline supplies decreased and the cost per gallon hit the economy like a bomb.
Suddenly the savior of the dollar, King Feisal was the guy everyone loved to hate. The American public didn’t really know about the ins and outs of the Petrodollar. They only knew that gas was expensive and they sometimes had to wait in line to get it.
The common thinking about the OPEC oil embargo in 1973 is that it was a reaction by Arab states to the Yom Kippur war. The media played heavily on that theme. The price per barrel quadrupled to about $12 dollars and the stock market continued to decline. From 1972 to 1974 the U S Gross Domestic product skidded from over 7% to -2%. Inflation rose from around 3% to over 12%. It was a mess.
In the 70’s there were a group of business’s known as the, “Seven Sisters” and they controlled over 86% of the worlds oil production. The group consisted of, Anglo Persian Oil (Now BP), Gulf Oil, Standard Oil of California, Texaco (now Chevron), Royal Dutch Shell, Standard Oil of New Jersey (Esso) and Standard Oil of New York (now Exxon/Mobil). Exploring for oil is not cheap. These big boys took a giant hit when the dollar started losing value. The Alaska Pipeline was getting into full swing in 1974 and inflation and rising wages was taking its toll on potential profits.
In January of 2001 an insider to the world’s oil trade made a startling statement. Sheik Ahmed Zaki Yamani was the Saudi oil minister in the 1970’s. He was Henry Kissinger’s bargaining partner and if anyone wanted oil from Saudi Arabia they had to go to Yamani.
In an interview from the London Observer, Sheik Yamani makes this statement:
“His voice quickens further when he reminisces about the era of great oil diplomacy in the Seventies and his contemporary, former US Secretary of State Henry Kissinger.
At this point he makes an extraordinary claim:
‘I am 100 per cent sure that the Americans were behind the increase in the price of oil. The oil companies were in real trouble at that time, they had borrowed a lot of money and they needed a high oil price to save them.’ He says he was convinced of this by the attitude of the Shah of Iran, who in one crucial day in 1974 moved from the Saudi view, that a hike would be dangerous to Opec because it would alienate the US, to advocating higher prices. ‘King Faisal sent me to the Shah of Iran, who said: “Why are you against the increase in the price of oil? That is what they want? Ask Henry Kissinger – he is the one who wants a higher price”.’
Yamani contends that proof of his long-held belief has recently emerged in the minutes of a secret meeting on a Swedish island, where UK and US officials determined to orchestrate a 400 per cent increase in the oil price.”
Jimmy Carter and OPEC are still seen as the villains of the disastrous economy of the 1970’s. The problems began long before Carter took office. The uncontrolled spending of LBJ forced Nixon to end the Bretton Woods agreement. The resulting catastrophe was immediate. Realigning the dollar to oil solved the problem. Forcing an increase in oil prices pulled dollars towards global trade and into the world’s central banks. Higher interest rates decreased the money supply back home. It was a tough couple of years for the American public.
Farewell To The Dollar – Part IV ~ Richard Nixon (Guest Commentary)
Farewell To the Dollar (Part IV)
by The Bunker
Richard Nixon
In 1969 Richard Nixon took the oath of office. The economic mess that was laid in his lap was monumental.
Foreign bond holders had been watching the U S spend dollars without any thought to the Bretton Woods agreement. France, Germany, Switzerland had begun to demand re-payment in gold. This was a two fold problem; gold was leaving the reserve pile and paper money was returning to America’s shores. It was only a matter of time before the Bretton Woods agreement would end.
In 1970 the whole thing began to unravel quickly. The Vietnam War was still costing too much. LBJ’s legacy programs had been under priced and the true costs were beginning to be slipped into the budget. By the end of 1970 the gold coverage for the dollar had dropped to 22%.
By 1971 the amount of paper dollars that had returned to America’s shores increased by 10%. Repayment in gold to foreign investor’s had decreased the supply by $22 billion. It was clear to the world that the dollar was no longer, “good as gold.” Germany was the first to pull the plug and allow the Deutsche Mark to float on the currency markets. This meant it would no longer peg it’s currency to the dollar. The dollar immediately fell by 7% against the German Mark. This made an already out of balance trade deficit worse. France and Switzerland soon followed Germany’s example. The value of the dollar was sliding on the world markets. By late summer of 1971 the U S gold reserves could not cover the dollar holdings of foreign bond holders. If any more countries demanded payment in gold, the reserves would be wiped out. This would have put the U S economy in default.
The results of all this was immediate and not unexpected, except to a congress that refused to do anything to stop it. Inflation followed by high unemployment and an ever widening trade deficit hit by early fall of 1971. The congress immediately blamed America’s problems on, “foreign price gougers.” Nixon had two choices; hope things got better or end the dollar to gold exchange.
Nixon Shock
In August of 1971 inflation was running close to 6% and unemployment was just over that same number. There was a very real possibility of a run on the dollar. President Nixon signed executive order 11615. This order installed wage and price controls on Americans and a 10% import tax on all goods. Nixon also ended the convertibility of the dollar to gold. The president in a Sunday night televised speech claimed he had to, “defend the dollar against speculators.” By Monday morning all the world’s currencies became fiat and began to trade without controls on the world market. The dollar fell against other currencies. Foreign holders of dollars lost wealth. They were trapped because they could no longer trade the fading dollar for gold. Nixon and his advisers had won and there was an election coming up.
Import taxes are the first salvo in trade wars. The world was in shock, something had to be done. By December of 1971 negotiations between the top 10 nations of the world (G10) ended in an agreement. The Smithsonian Agreement ended the import tax. Nixon proclaimed that this solved the world’s monetary problems. History will show it had only a temporary affect.
Back home Nixon had to win an election. He had earlier fired the Federal Reserve chairman and installed a close friend, Arthur Burns. To avoid a recession Nixon forced the chairman to do the opposite of what needed to be done. The Federal Reserve chairman lowered interest rates and increased the money supply. Nixon had promised that the wage and price controls would only last 90 days. He extended them 1,000 days to hold down inflation and stabilize unemployment. The combination of low interest rates, cheap money and relatively good employment made the economy seem stable as voters headed off to the polls. Nixon won a second term. As anyone who lived through the 1970’s knows, the illusion would soon wear off.
Outside the country the dollar was still losing value. Something had to be done to prop up the dollar and get it flowing throughout the world. President Nixon went to China in 1972 to begin trade talks. Henry Kissinger had an old friend in Saudi Arabia.
China had the potential of 89 million new customers and Saudi Arabia was the world’s largest oil producer.
In 1973 King Faisal of Saudi Arabia signed an agreement with the U S. He would only sell his oil in U S dollars. He also agreed that any excess profits from the sale of oil would be invested in U S Treasury Bonds. What did the King get in return? The one thing America had plenty of, military power. Nixon agreed to protect the Saudi oil fields from any aggressors. By 1975 all the OPEC nations had signed on. The dollar was safe. It was the beginning of the Petrodollar.
Once again the world needed the U S dollar. Any country buying oil, like a soon to be growing China, had to exchange their currency into dollars. This kept the American currency flowing like oil around the globe. It also meant that the congress was unrestricted and could spend as much money as it wanted. With the demand for oil always increasing, more dollars were needed to buy oil. There was no need to worry about the gold reserve. The Saudi’s also kept sending America money every time they bought U S bonds. It was a perfect plan. Richard Nixon wasn’t so lucky and had to resign in disgrace.
Kevin Jackson – Obama’s Economy
Farewell To The Dollar – Part III ~ The 1950’s, The 1960′s (Guest Commentary)
Farewell To The Dollar (Part III)
by The Bunker
The 1950s
After the war the soldiers came home and went right to work. Not just in the factories but in the bedroom. The “Baby Boom” was in full swing. This from Wikipedia:
In 1946, live births in the U.S. surged from 222,721 in January to 339,499 in October. By the end of the 1940s, about 32 million babies had been born, compared with 24 million in the 1930s. In 1954, annual births first topped four million and did not drop below that figure until 1965, when four out of ten Americans were under the age of twenty.
It didn’t matter. The American economy was unstoppable. With the dollar as the reserve currency and the nation’s huge industrial capacity, global demand for the country’s products exploded. The world economies soon learned that it was easier to trade around the world in dollars than in their own currencies. If they wanted our products, and they did, they could sell what they produced to us. This allowed them to be paid in dollars which they could use to buy other goods. They also bought U. S. Treasury Bonds. Currencies are traded on the open market like any commodity such as wheat, corn, soybeans. If there is demand for a commodity the holder of that commodity is in the driver’s seat. It was still a juggling act because the U. S. couldn’t flood the world with dollars. Remember the rule; dollars or debt could not exceed the gold reserve. If the politicians wanted to spend more money they had only two choices, raise taxes or sell bonds (increase debt). Increasing debt was tricky because of the Bretton Woods agreement. Taxes are never popular. This kept everyone in line, for awhile.
The 1960’s
It was a groovy time man. Oh, there were problems, big problems but overall the economy plunged ahead. The death of President Kennedy was more than just the end of conservative governing. It was the beginning of the end for the U. S. dollar.
President Lyndon Baines Johnson (LBJ) wanted it all. He was a Texan with Texas size appetite for spending. The “Great Society” was born. He also wanted a war, the Vietnam War, and he got it, right in his Texas size nose.
The Vietnam War should be measured in American lives lost, that cost was over 58,000 young men and women. The dollar cost during the term of LBJ is a conservative $345 billion dollars. The U. S. treasury began calling in favors from old WWII allies to buy our bonds, we needed money.
Lyndon Johnson also desperately wanted a legacy. The Great Society was his baby and he fed it good. Is there a total accounting for the direct cost of this massive expansion of government? Not really, it was such an orgy of programs and spending it would take an audit of the budgets for those years to breakdown the total cost. The legacy costs of Medicare and Medicaid are the real busters. It would be safe to say that LBJ forced billions of dollars in government borrowing and printing. His seven year run as President broke the bank and tipped the scales of dollars to gold. He decided not to run for a second time. It’s a good thing, he would not have liked what was about to happen.
Note
The parallels to what happened in the late 1960’s and early 70’s and what is happening today need to be pointed out. The U S government under LBJ overspent, borrowed and printed too much money. The foreign holders of the debt and dollars got nervous and demanded repayment. According to Richard Nixon the dollar was under attack. But was it? Or was it just the world’s economies reacting to what America had done to itself?
Now in 2013 world currency wars are beginning. Once again the U S has flooded the world with dollars and debt. As you read through the next chapters of this saga compare what happened then to the headlines of today.
Farewell To The Dollar – Part II ~ Bretton Woods, 1944 (Guest Commentary)
In July of 1944 delegates from the 44 allied nations met at the Mount Washington Hotel in Bretton Woods New Hampshire. They wanted to solve a very serious global problem. This problem had led to two world wars in the span of one century. The dilemma was two fold; international currency wars and trade wars. Both of these were contributing factors that pushed the world’s nations into hot wars. The 77 delegates to this conference were going to solve this once and for all. They actually came up with a good plan.
It was decided that the world needed a stable currency that all the nations would be tied to. It was clear to all who attended that the United States Dollar would make an excellent choice. America was the only industrial super power whose homeland remained unscathed during the war. Its money was backed by gold and the nations Treasury Bonds could be redeemed in gold. The United States Dollar became the world’s reserve currency. This was a huge win for America. Before the war Britain had held this honor. The switch from the British Empire to America forced a British official to proclaim:
“[This agreement was] The greatest blow to Britain next to the war”, largely because it underlined the way in which financial power had moved from the UK to the US.”
To level out the playing field in economic trade it was agreed that all the world’s currencies would be pegged to the dollar. The nations pledged to a parity arrangement that kept their currencies within 1% of the reserve currency (The dollar) on international currency markets. In return the United States agreed to peg the dollar to gold at the rate of $35 per ounce. The U. S. also promised to exchange the dollar for gold at the defined rate with any nation holding dollars or U. S. debt (Bonds). American delegates also agreed to not exceed the money supply and devalue the dollar. The U. S. at the end of WWII had $26 billion in gold reserves. This amounted to approximately 62% of the world supply. If the
U. S. Treasury went on a printing spree and created more dollars or debt the balance would be upset. Remember, the dollar was pegged at 1/35 to an ounce of gold, too many dollars or too much debt and the system wouldn’t work. The American delegates promised this would never happen. This made the American dollar, “good as gold.”
