Tax withholding proposed for independent contractors.

The NY Times reports that the IRS' "taxpayers advocate", Nina E. Olson, has proposed tax withholding for American's independent, self-employed workers. Which makes a major change. She also proposes changing or even eliminating the Alternative Minimum Tax, which is supposed to make sure high earners pay at least some tax.


I have to challenge the assumption that by 2010, 33 million Americans will be making more than a million a year. That's quite a bit. How do they know that? Let's focus on what people are earning today, and worry about 2010 in 2010. In any case, the AMT was set up to deal with the many loopholes in the tax code, most of which benefit the rich. If they do repeal it they should first eliminate the loopholes which made it necessary in the first place.

I find it strange that she suggests that the AMT hurts "middle-class" taxpayers, when it only applies to those who make one million dollars or more. It's the rich who will really benefit from this, not the middle-class, who will end up paying more taxes to make up for what the rich don't pay. But ever since the boom there's been a lot of pressure to repeal this, and I guess they're going to get their way. Same as the inheritance tax. All of which increases the growing gap between the rich and the poor.

Anyway, I feel it's "good policy", not "bad policy." If it needs to be adjusted for the growing incomes since 1969, that makes sense. Raise the threshold to two or five or ten million. But let's not pretend repealing it is aimed at "helping" the "middle-class." That's nonsense.

I've long felt that tax withholding ought to be voluntary. The argument is that taxpayers need help in managing their finances. At the very least, the government ought to pay interest on this money, which amounts to an interest-free loan to the government. In any case, it's another extension over the growing federal control of people's lives.



Concerns over slowing US consumer spending.

Casting more doubts over the so-called economic "recovery" is this other article from the FT which expresses "concern" over consumer spending.


Wow, people "may" be spending less because they're not working. I guess you'd need a degree in economics to figure that out. And why do they strip out "volatile food and energy prices" from the inflation figures? Those are the two biggest expenses of your average family. How convenient. That's a blatant lie, the worst kind of spin. They should at least report what the inflation figures are when you include those. And notice that they strip out auto sales, also "volatile", whatever that means, from the retail sales figures.

Of course, including auto sales figures may itself make the figures even more inaccurate. GM, for instance, recently gave away 1,000 cars as part of a sales promotion. But they include those in their sales figures. See this NY Times article on the American auto industry, Big Three Hope Rising Economy Will Lift All Vehicle Sales. It certainly doesn't indicate that the US economy is improving.


"Expecting a slight profit for 2003..." More spin. They said the same thing last year, and the year before. And if they do show a "profit" it will be by manipulating the accounting, especially by conveniently writing the $6.4 billion losses off their taxes (and onto yours.) Read between the lines of the NY Times article to see what bad shape American business is really in. And note that they continue to refer to Chrysler as one of the American "Big Three" automakers, when in fact it is now owned by the Germans. Don't be surprised if you wake up soon and read that GM and Ford have also been taken over by the Japanese and the Europeans.

[I also note that the NY Times includes Financial Times headlines on its business page. Which leads me to think that their (FT's) figures and reporting can't be trusted that much either. Are they part of the same media conglomerate now?]

For another viewpoint, the LA Times reports that Assorted Signs Paint Rosy Economic Picture. I notice that they _do_ include auto sales in their retail sales figures, which is interesting.


That's the great thing about the web. It allows you to compare the various reports. It's amazing what that shows up too.



Dollar edges higher.

The dollar edged slightly higher today, reports the Financial Times.


I think the focus on the decline in unemployment claims is a bit misguided. People only claim unemployment if they've been working during the past year or so. Since there are many people who have now been out of work for a year, or two or three, then they can't claim unemployment. And the Congress last December refused to further extend benefits, as they have been doing the past two years. This doesn't mean more people are working, it means they've given up looking for work, and have exhausted their benefits. Classic spin going on here.

And it's the weaker dollar that is primarily responsible for the slightly slower American trade deficit, as well as the increase in the stock markets. Along with the war profiteering, of course. See this other Financial Times article which notes that IBM reports higher sales due primarily to the weaker dollar.


I didn't realize that financial services is now IBM's biggest business, not computers. That follows the trend in American business. Ford, for instance, is losing money selling cars, but staying alive by profits from its financial services. And notice that what growth IBM has is in Europe and Asia, not the US.

Note that they are reporting that revenues grew from $23.7bn last year to $25.9bn this year. But that's not taking into account the lower value of the dollar. After calculating that, they've actually declined. I think. They manipulate the figures so much, taking "charges" and such so that you really don't know what's going on.

I wonder if PriceWaterhouseCoopers's accounting practices are any more honest than the now-defunct Arthur Anderson's were. Given the collapse of the major Italian conglomerate Parmalat, due primarily to accounting regularities, I have to seriously doubt it. I don't know who did their accounting. But given that Parmalat operated in something like 140 countries, that American firms such as MorganStanley were heavily involved, and that PWC is one of the world's big four accounting firms, it would seem that it's unlikely that IBM/PWC could have been entirely unaware of what was going on. They're all in it together.






Moon and Mars costs don't include ongoing maintenance.

There's been a lot of discussion about Bush's proposal to establish colonies on the moon and Mars. One thing that hasn't been pointed out is that the initial estimates of the costs involved don't include the costs of keeping the bases going once they're established. The initial estimates of the total costs are something like $500 billion, but given the history of overruns in the space program, it will almost certainly end up being in the trillions.

Which itself is an almost inconceivable amount, and even more when you consider that since America is broke, it will have to borrow the money. I shudder to think what the interest charges on a one trillion dollar loan will be.

But this is just the costs of establishing the programs and planting the initial colonies. Once they're there they will have to be maintained, and presumably gradually expanded. That means at least tens or hundreds of billions of dollars a year, if not more. And those costs will never end since the suggestion is for permanent bases. I repeat that: the proposal is for permanent bases that will have to be supported for decades at least. And given Murphy's law ("whatever can go wrong will go wrong") there will almost certainly be enormous unforeseen expenses. If something does go wrong, and it will, we'll have to rescue those folks, no matter what the costs.

These are enormous projects, maybe even the biggest in human history. I'm a big fan of space exploration, and an even bigger fan of colonizing it, but I can see what it will cost. I think eventually it will not only pay for itself, but make a profit. From tourism if nothing else, along with unexpected scientific advances. (I can see the skeptics shaking their heads about that as I write. :)) But in the meantime we're talking potentially many trillions over the next few decades.

If we're going to do this we need to plan very, very carefully, and go very, very slowly. And if at all possible do it on an international basis so that Americans alone don't bear the entire burden. The Chinese are already planning on a permanent base on the moon. I'm sure they don't want to pay all of the costs.



Dollar retreats a bit.

The dollar retreated from its recent lows a bit reports the Financial Times. The main reason seems to be comments by the head of the ECB that it wanted to slow down the rise of the Euro a bit, and the monthly decline in the US trade deficit.


I personally wouldn't consider not falling for two days to exactly constitute a "rebound." But the bankers, especially British and American ones, desperately want to convince themselves, and everyone else, that the dollar's decline is just temporary. And a decline in the dollar is certainly going to favor American trade, so it's not surprising that the deficit should be reduced a bit. But it was $38 billion. That's still a whopping amount of money, close to half a trillion at an annual rate.

Certainly if the European and Asian banks continue to pour money into propping up they can slow down the decline. But that takes a lot of money. The dollar holdings of Chinese and Japanese banks now total more than $2.4 trillion, which is a lot. They can prop it up, but it will take trillions. They can't do that forever.

And certainly its decline will not be a one way street. Like all markets it will go up and down. But the trend is down. And it appears that currency traders are hedging their bets while waiting to see what happens at the G7 meeting in February.

Also, Paul O'Neill's recent revelations about how the folks in the White House view everything in political terms, and in terms of how it benefits them, wouldn't seem to convince anyone that their policies will be aimed at stabilizing the global economy. But rather at how they can profit from them, even at the expense of everyone else.

One issue that I don't understand at all, and which no one seems to ever discuss, is how works in regard to American companies that are owned by the Europeans. Chrysler for instance, which is now owned by the Germans. They keep talking about the "European", "American", "Japanese" and other economies. But the fact is that they're all mixed up now, and it simply isn't cut and dried like that.






OPEC gets closer to pricing in Euros.

Writing in the Globe and Mail, and based on Reuters reports, Patrick Brethour reports that OPEC is moving closer to making the transition to pricing oil in euros, rather than dollars. This has been predicted, and it increasingly looks like it's going to happen.


One thing in the article that may not be quite accurate is that the impetus is coming primarily from Persian Gulf states. Russia, which may now have the world's largest oil reserves, and which does much more trade with Europe than it does with the US, has also suggested it would like to see the change. And Venezuela, where the US is steadfastly trying to overthrow its democratically-elected government in order to regain control over its oil, also doesn't have much interest in sticking with the dollar. Mexico is another country which could well benefit from it. The peso is one of the few world currencies that hasn't risen against the dollar, and the switch to euros could change things a lot there. (I really don't know much about the peso or the Mexican oil industry, but that makes some sense to me.) It would make political sense though for the Venezuelan oil minister to focus on the Persian Gulf states, at least publicly.

I also note that the article is datelined Calgary, center of Canadian's oil industry. The Canadian dollar is rising against the US dollar, but I'm not sure how it's doing against the Euro. Currencies are so complicated, you can go crazy trying to figure out all of the implications of these changes. But George Bush's Texas, and the Bush families extensive oil interests, on the other hand, would probably not benefit.

This is an extremely complex economic development. And would affect countries all over the world in many different ways, ways that would be very difficult to foresee and plan for. (Norway, for instance, makes lots of money on North Sea oil, and the fact that it's priced in dollars is probably the major reason they haven't adopted the euro. Great Britain also counts a great deal on North Sea oil.)

So the folks at OPEC would likely proceed slowly and cautiously. But if it happens it would certainly constitute a somewhat significant event in the global economic history. Especially for America. Oil has now replaced gold as the world's economic standard, and the US has benefited enormously from having it priced in dollars. And everyone in the world is terrified of American dominance, and there are few things that would alter that more than this. It would be a big step in global efforts to draw a noose around the US, the so-called "redlining of America."

Americans really need to wake up to the degree and extent by which American economic policies (both Clinton's and Bush's, this isn't a partisan thing at all) are damaging their long-term economic interests. Believe me, the American stock markets wouldn't like this at all. The ones in other countries I think would though.



US economy is not "humming."

I keep reading these articles that state that the US economy is "humming" now, apparently based entirely on the recent rise in the stock markets. I agree that it's doing a bit better than it has been during the past three years, which is not surprising since it couldn't possible be doing worse. And since the federal government and federal reserve have been pumping hundreds of billions of dollars of cheap money into it, which is bound to have some effect.

But the stock market alone is NOT the "economy." The economy consists of many more things that just the markets, which mostly represent the interests of the wealthiest ten percent of the population. It's also measured by jobs, by the rate of personal bankruptcies, by the strength of the dollar, by whether there is money to keep schools and police stations open, by the trade and budget deficits, by whether people can afford to go to the doctor when they are sick, and many other measures. And all of those are not doing well at all. It's convenient and easy and simplistic to just judge it by the Dow Jones average, but it's not realistic.

My personal economy is certainly not "humming" by any measure. I'm 51, and I have never in my life had such a hard time coming up with steady sources of income. And I have a very good college education, plenty of high-tech skills and such. I shudder to think how the folks with just high school educations are doing.

In my state of Oregon schools, police and other public institutions are on the rocks like they haven't been since the Depression, and far from getting better, they are by all indications things are getting worse. Significantly so.

And it's much worse among the African-American and Hispanic populations. Even during the height (depth?) of the Depression, 90% of black folks could find at least some work. Now the unemployment rate among them is around 30%, and rising. (At least as far as I can tell, they do a great job of hiding these statistics, so you never really know.)

And the single mothers I know are almost all rather desperate. This is almost an entirely "white male" recovery. And as a white male myself, I can assure you it's not even most of them.

And I don't see any of the Democratic candidates offering any thing other than platitudes, and what amounts to a kinder, gentler "business as usual." Dr. Dean sends me email asking me to read Thomas Paine's "Common Sense." I've read it, Doctor. What I want to know if you have any?






Dollar falls, then rises on ECB comments.

The Financial Times reports that the dollar fell to nearly $1.29/euro, then rose after a meeting of the European Central Bank (ECB) expressed concerns about the euro's rapid rise. Which was in contrast to last week's statements that it was not that concerned.


Belief that the Japanese government would also continue to prop up the dollar also slowed its fall. So the governments are trying to keep up its value rather than let market forces work. But private traders continue to see weakness.

Rapid change, either up or down, is bad for economic markets since it creates uncertainty. So in that sense it's probably good that various governments are trying to control things. But simply trying to hide the many serious long-term problems in American finances could only serve to set the stage for a more sudden plummet. Perhaps letting the dollar gradually fall as the markets want would be better.

I also feel that the bankers in Europe and Japan have significant private investments in American securities and investments of all types. And that, to a certain degree, they're trying to protect their own wealth, and reputations, at the expense of the interests of their supposed constituencies.

The fact is that their economies are highly co-dependent on the American one, and co-dependency is no better in economic relationships than in personal ones. Sooner or later you have to confront your problems and deal with them. They just don't go away.

The Bush administration is being very successful at using the dollar's fall to hide problems in the American economy. And they're going to keep trying to do that during the election year. And maybe they'll get away with it. As the old saying goes: "No one's ever gone broke underestimating the stupidity of the American public."

I still think it will at least break the $1.30/euro level this week. We shall see.






New US visa requirements damage tourist industry.

While you would hardly know it from reading the world's financial publications, which still focus almost exclusively on the 19th and 20th century standards of manufacturing and retail sales, the tourist and travel industries are now the largest in the world, especially in the amount of jobs they create. I read somewhere that something like 1 in 10 jobs in the world are in these industries. A lot of these jobs are fairly low-wage service jobs, but they still pay real money and are essential to any modern economy.

Tourism is, in fact, the number one industry in more countries than any other industry. This would include a lot of so-called "third world" (isn't it about time we dropped that archaic term?) countries, but it does represent something quite significant in modern economics. And it is quite new, something that only developed during the 20th century, part of the amazing growth of leisure time and money of recent times.

You don't, for instance, even find the word "vacation" listed in most 19th century dictionaries. If you had asked most people a a bit over a hundred years ago if they were planning a "vacation" they would be quite puzzled. Wouldn't know what you were talking about. Most likely they would say that, well, sometimes on Saturday we only work eight hours, and have time for a bath. Is that what you mean?

Which is why the many post-9/11 actions to harass, restrict and limit travel here, are having a devastating effect on the American tourist industry. Something that will accelerate due to the new regulations that will require most foreign visitors to get visas before they can come, at least until they are able to get a new biometric passport, which will take a while. An article in the Scotsman, We don't want you without a US visa, discusses how concerned the travel industry is about this, both here and there.


Note the $529 billion figure for the US tourist industry. That's huge. Comparable to what Wal-Mart takes in. Also note that they mention the SARS virus as a problem, even though, so far, the US hasn't had a case of SARS. I guess they're referring to the Canadian problems during 2003. I didn't realize though, that when many people come to America, they also plan on visiting Canada. Or at least they appear to think of North America as a single destination.

I also didn't realize that Florida has become such a major international destination.


I'm also just starting to realize just how restrictive the new regulations are. People in the UK, for instance, will have to travel to London or Belfast first for a face-to-face interview, and pay $100 in order to get a visa. The Scots are particularly worried, since apparently the US closed its visa facility in Scotland a while ago in order to save money. And it would appear that frequent Scottish visitors simply won't bother.


What's particularly sad about this, is that with the declining dollar, travel to the US has never been cheaper. One of the few good things about it. And it will cost the British government millions of pounds to issue the new passports, something that will increase already growing anti-American sentiment.



Canadian economy strong and growing.

While the US economy continues to melt down (the rising stock markets notwithstanding), the Globe and Mail reports that the Canadian economy had a great year in 2003, and continues to grow. Stock markets are up, the loonie (the Canadian dollar is up), employment is growing. Growth, in fact, far exceeded even the most optimistic forecasts. Fifty times more jobs were created in Canada during December than in the US.


What's particularly relevant to Americans about this is that Canada is dealing with so many of the same problems that afflict the US, (rising Euro, Chinese trade, mad cow disease, etc.), and is tied in many ways to many troubled US corporations. Yet despite all of this it manages to grow. Which would suggest that the problems in the US are of its own making, not some imagined problems in the global economy.

It's not all good news. Manufacturing jobs declined, but were more than made up by gains in health care, social services, finance, insurance, and, especially, the booming real estate industry. On the other hand, over 40,000 of the new jobs created in December were full-time permanent ones, whereas it would appear that the measly 1,000 jobs in the US were most likely temporary seasonal ones.

The continually rising loonie leads me to suggest/predict that the Canadian dollar may well achieve parity with the US dollar by the end of 2004. Which would be absolutely amazing. It's very likely though that the Canadian bankers may take measures, raising interest rates, to slow this down, although I don't think even that will make much difference at this point.






O'Neill says Bush won't discuss economics with others.

The Guardian reports that former Treasury Secretary Paul O'Neill has said that President Bush won't even discuss the economy with treasury officials and other economic advisors.


As has been said before, the majority isn't silent, the government is deaf.






LA Times comments on US deficits.

In a new editorial, Rising Deficit, Rising Fears, the LA Times adds to the growing concern raised by the out-of-control American deficits. [Registration req'd.]


Rest assured that savvy, well-to-do baby boomers aren't going to take the hit. They're already moving their funds out of the country, buying up property here and there, and planning on comfortable retirements while the country that gave them everything goes down the tubes.



Dollar has a very bad week.

The Financial Times reports on the dollar's very bad week. I noted the other day that it was going down at a rate of a penny a day. But it seems to be picking up. A penny an hour? Wow.


It's about to crack the $1.30/euro barrier too, which should have a major psychological effect. It also appears that it would be going down even faster if it were not for massive intervention by the Japanese. But that even that seems to be having only a temporary effect, also apparently lasting only minutes. It would seem that the Japanese are reaching the limits of what they can do, and that like the European Central Bank, will just let it go.


I said before that I think it will hit the $2/euro level by the end of the year. Now I think it might just do that by the end of summer, if not before. At the current rate it could cross $1.40 just by the end of January. It just seems unavoidable. The renewed attacks in Iraq, a jobs report that only 1,000 jobs were created in the US during December rather than the 150,000 that economists had predicted, which is really bad news given that it was during the holiday shopping season, the fact that the US government clearly thinks that rising stock markets are a reason to avoid making any major economic changes, accelerating American deficits, an election year which makes it impossible for either party to prescribe any harsh medicine, and many other developments all suggest that there is no reason to expect the trend to reverse. On the contrary, they indicate that it will accelerate.

The Guardian business section has an overview on the reactions of various media around the world to the dollar's change, Markets wonder where the buck will stop. It would seem that only fairly conservative publications in the US and the UK think it's not that serious. Everyone else predicts more of the same. One side is here.


And the other side is here.


Gotta love that "money is just paper" part. That's absolutely priceless. Does everybody else in DC know that? :) I'll have to keep that in mind when it comes time to pay my taxes. Will they accept toilet paper? And that it's all about "trust, outlook and confidence in the government which has issued the money." Actually, to a certainly degree that'sexactly it. It's not just the dollar that's falling, it's global confidence in the US government. But it's not just perception. The American deficits are very, very real, and growing. And sooner or later the bills come due. And to the folks at Newsday, is a penny a day "gentle?"

And where they say it's only against the yen, pound and euro. Only?. Aren't these the three most important ones in the world, the currencies that most other countries use as a yardstick? In any case, that's a blatant lie, or at least a very severe distortion of the facts. It's affecting the Australian and Canadian dollars as well, and it's beginning to hit many others as well. The only major nation that seems to be going the other way is, sadly, Mexico.






IMF projects potential $47 trillion US shortfall.

A new IMF study, reported in the NY Times, suggests that US deficits threaten the stability of the entire world economy. It's a story that's getting told more and more, especially as the deficits get worse and worse, but for the IMF to state it so bluntly is especially worrisome. And rather surprising given the influence Americans have in the organization. They also project a potential shortfall of a whopping $47 trillion over the next few decades.


But even this is not enough to get the attention of Bush and company. Somehow I don't think that they're the ones that are going to lack food and health care.


Especially note this statement about the size of the projected shortfalls. $47 trillion. (Yes, that's trillion, not billion.) Wow. And five times the entire American GDP. That's an almost inconceivable amount of money.


As someone who is 51, I have to assume at this point that all of the money I've deposited in Social Security is pretty much gone, or devalued to the point of irrelevance, and that I'm going to have to do some awfully fancy financial finagling in the next decade if I want to avoid ending up on the streets in my old age. Damn, damn, damn. Oh well, it's only money. It's only life. It's only ... catastrophic.

But from now on it's cash only, and I think it might be wise to avoid American banks as well. For the first time I see the possibility of large numbers of American banks going under, or at least having their funds confiscated by the government one way or another. The devaluing of the dollar to finance the deficit is actually a variation on that. I know that there's FDIC (Federal Deposit Insurance), which is supposed to back the banks in the event of a collapse, but that's only on paper, and that isn't any good if there isn't any actual cash to cough up.






China studies yuan peg changes.

The Asia Times, in an article on the recent currency changes, Dollar slide to push Euro to new heights, reports that on Monday Chinese officials indicated that they may move sooner than later to change the way the yuan is valued on global markets, moving from tying it to the US dollar to tying it to a basket of international currencies. Which, in the long run, would be the best thing for a stable global economy.


I find the Asia Times to be an excellent source of objective reporting on world affairs. Perspectives you simply don't find in the American and European press.



Dollar continues its penny a day decline.

The Financial Times reports that the dollar continued its now a penny a day decline today, reaching $1.28/euro, albeit briefly.


Given the strength not only in the US stock markets, but markets worldwide, I'm not sure what this means, but there you are. It can't possibly continue to decline at this rate. At a penny a day that would mean $3-4/euro by the end of the year, if not more.

For a more general analysis of this all, including some historical perspective, see this article in the Guardian, The Best Recovery Money Can Buy, by William Keegan, the Observer's senior economics commentator.


It's about time someone acknowledged that the growth in US stocks is due almost entirely to warmongering and war profiteering, along with an easy money policy based on borrowing from future generations. But those are just short-term gains. That is, the rising Dow does not signify increased long-term investment in endeavors that have any long-term payoff, which is what capital markets are supposed to be about. On the contrary, it just represents the sacrifice of America's future fiscal and social health to Bush's reelection prospects. "After us, the deluge."

And yet another Guardian article on the subject, No end in sight to dollar's descent, in which they lay most of the blame on the American Federal Reserve's policy of rock-bottom interest rate.

I won't quote much of it, but I did note this part.


This is noteworthy, because just today it broke through that $1.28 level. And I don't think the risk of a "crisis" is low at all. I think it's already reached crisis levels. But I'm not an economist, so what do I know?

I have to link mostly to British and other foreign reports on this subject, since the American press seems to be studiously avoiding the issue.






China is the joker in the global currency wars.

While most discussion of the changing values of the dollar and euro focus on those two currencies, and those of related countries such as the UK, the real joker is China. At the moment the Chinese yuan is directly tied to the dollar. But if the dollar continues to change so rapidly, they will have some rapid decisions to make.

For one thing, the Chinese economy is just beginning to achieve some real stability, for the first time in a long time, and the last thing they need is a shaky and constantly changing currency. So they might have to cut the ties sooner than they expected or wanted. Possibly even this year. They might also have to decide which market is of more interest in the short term: the European one of 500 million, or the American one of only 300 million.

On the other hand, they might decide that the long-term value of being tied to the American economy is worth the effort. Both nations have a lot of interests in common, and there are lots of reasons to work together. Unfortunately, the Bush administration doesn't seem to care about long-term issues, but only focuses on the immediate short-term. So they might end up cutting America's throat.

It really all is incredibly complicated. And seems to be getting more so. And then there's India. And Russia. And all of those eastern European countries getting ready to join the eurozone. Going to be a bumpy ride.



The dollar and the Euro in 2004.

In its year-end special section business outlook for 2004, the NY Times finally addresses the rapidly changing value of the dollar, and discusses the various possibilities. Analysts Hope the Weakening Dollar Will Avoid a Sudden Plunge. They acknowledge that a sudden plunge may hurt the economy, but they still seem to be the victims of wishful thinking.


The global head of currency strategy at Citigroup would seem to be a position where one would look at the real picture. But the idea that the dollar may go up at all seems incredibly unrealistic. As I say, it should reach at least $2/euro this year, if not $3-4/euro, but anything remaining less than that would be doing very well. As far as the other prediction of $1.45/euro, at the current rate of decline it could hit that level within a month or two.

But I think it well to get these predictions on record. I could be wrong about my own predictions, but I really think that these people are simply claiming that the dollar will remain stable because: (1) They have their own investments in dollars, and are dependent on doing business with others who do as well, and know that any public expressions of weakness will hurt their own pocketbook; and (2) Because they simply assume that just because America was strong during the 20th century it will remain strong during the 21st. And they also assume that because Europe, Russia, China, India and other great nations have been week that they will continue to do so.

Basically, they won't ever admit any serious problems because the very expression of difficulties itself could cause damage. And because they can't admit that their American-centric view of the global economy is a 20th century anachronism, and don't have the education or knowledge of the world necessary to develop a more modern approach. They're living in the past.

Consider if you will the possibility that it's not the dollar that is declining at all, but rather the Euro that is rising. You have to break free of American-centrism to see this though. The British as well as the Americans are having a hard time breaking free of obsolete imperial pretensions and attitudes.

I could certainly be wrong about my predictions. But one thing I am definitely correct on is that all of these people were way off the mark during 2003. All of them stated a year ago, fairly conclusively, that the worst the dollar could do was $1.15/euro, or so. But they never learn.

Found a couple of interesting blog entries on the subject of the dollar and euro. This one by Steven Kyle at Economists for Dean, who discusses the possibility of the dollar being replaced as the world's reserve currnency. Interesting discussion in the comments there. And this one by XXX over at Atrios/Eschaton.

One note on the subject of the dollar's being replaced as the world's reserve currency. I think the very idea that any one currency will be the global standard is obsolete. The world is becoming more multilateral and intertwined (as we all know), and the global economy is simply far too complex for any one currency to dominate. And far too fragile for all of the eggs to be in any one basket. What's happening here is the emergence of a basket of major currencies serving where one used to do. But the idea of any single nation's currency becoming a standard is as archaic as the notion that any single nation could establish an old-fashioned "empire." It simply can't happen anymore.

But if there is just one as the standard, it will almost certainly be the Euro, probably tied in some way to the Chinese yuan. But it won't be the dollar; the American government, especially the Treasury Department and the pertinent congressional committees are far too corrupt and incompetent for the world to trust them anymore. Heck, I'm an American and I don't trust them. There are problems with the Euro, but with 20 or more countries keeping watch it's much more likely to remain competently and honestly managed.






Stocks up, but corporate sleaze remains.

The Guardian reviews developments in corporate America during 2003, Scent of sleaze persists amid US boom, and observes that while the Dow may be up quite a bit, most of the problems which came to light during the post-boom crash still remain. "Sleazy" and "squalid" are the terms they use to describe corporate governance in America.

And get this, my fellow Americans, corporate profits during the third quarter of 2003 rose a very whopping 30%, the largest increase in 19 years. Did your income increase 30%? No, nothing's changed since Clinton. No limits to corporate greed and no end in sight. In fact, since they let them keep all of the money they stole the last time, there's no reason to suggest that they won't try to steal any more this time. Why not? With enemies like Eliot ("Just promise not to do it again, return one percent, and you can keep the rest") Spitzer being held up as "heroes", who needs friends? What a joke.


It's funny how eager and desperate everyone seems to claim that the "boom" is back, just because of a small rise in the stock market. A period of just normal business isn't good enough anymore; it has to be a "boom", or it just doesn't matter.

Their views are quite simplistic, and permeated by the sins of omission. "Fueled by tax cuts and government spending." It's so much bigger than that. No mention of the fact that most of the gain was due to war profiteering and the war industries, altho I guess that could count as government spending. But it's still blood money. And what about the lowest interest rates since World War II, thus flooding the markets with dirt-cheap capital, but at the cost of destroying any incentive for prudent Americans to save.

"Confidence returned to both the markets and the economy..." they say. But that's just it. It hasn't returned to the economy, not really. Just the markets. Overall things remain rather depressed. Where I live, in Oregon, they're still planning on more school closures this year. And no one I know expects the higher Dow to result in any significant decrease in the near 10% unemployment rate, at least not in the near future.






Dollar continues decline.

The Financial Times reports that the dollar continued its rapid decline on the last day of the year, falling to $1.26/euro. It's going down at about a penny a day, which is quite a bit. The most rapid decline in history anyway.


I think it will continue to go down during 2004, reaching at least $2 to the euro sometime during the year. Which would mean its decline will slow down a bit. The current rate of decline of one penny a day would mean a value of $4.91 against the Euro in a year. That seems almost inconceivable. But in fact the rate of decline accelerated during December, especially since Saddam was captured, so who knows what the new year will bring. At a penny a day, it will cross the $2/euro threshold before April.

There doesn't seem to be much that the American government can do about it either. In fact they seem to think it's actually good for the US, which it may be in the short run. It's probably the major reason for the Dow's recent rise despite the lack of any significant economic growth in the US.

The major tool for managing currencies is the interest rate. But the Fed can't raise it very much without endangering the so-called recovery in stock prices, and that's extremely unlikely during an election year. The current easy money policies help corporate America in the short term, but at the long term expense of the economy as a whole. And the world markets are starting to realize that. The G7 meets in February so it will probably be the hot topic there. But again, what can they do?

There's another article in the FT which reviews the changes during this year, and points out that a prediction of the current levels would have seemed "outlandish" a year ago. I'm sure my prediction of $2/euro by 2005 also seems "outlandish."






Despite everything, the Euro continues to rise.

The Financial Times reports that the Euro has had an excellent week, going up a full two cents, which is a lot in the currency markets.

It continues to rise despite last weekend's quadruple whammy of (1) Saddam's capture, which presumably should have raised America's reputation, at least a little bit; (2) The Dow going over 10,000; (3) The collapse of talks on the EU constitution, which should raise questions about the Euro's future; and (4) simple year-end profit taking, where those selling the dollar (and America) short cash in.

But none of these seem to matter. The perception is that the American economy is still being very badly mismanaged, and that no real efforts to deal with the problems are being made. The appointment of a former Goldman, Sachs executive as new head of the NY Stock Exchange, for instance, says that business will continue as usual.


All of which would seem to indicate that it's not the Euro that's rising, but rather that the dollar is falling. The fact that they're talking about the pound reaching the $2 level next year is quite noteworthy. That's a major change. And, at the current rate of change, it's quite possible that the Euro will also reach the $2 level by the end of 2004.

It would also indicate that the rise in the Dow is not due to increased economic activity in the US, but simply, or at least mostly, a reevaluation of its worth in the international markets. That is, $10,000 worth of American stocks today will only get you, internationally, what $7,000 worth would have brought just two years ago.

But some would say then, well if a European can buy an American house that cost a €1,000,000 just two years ago for only €700,000 today, then that's a reason to invest here. Maybe so, and there should be some of that. But they may also say that, well I'll wait another year, and it will only cost €400,000. And the year after only €100,000. Impossible? We'll see. But that's what the current trends are indicating.

It also would seem to suggest that the world feels that election year pressures and politics within the US will make it impossible to address any of the very serious, and long-term, fundamental problems with American business. Certainly none of the presidential candidates, Democratic or Republican, are talking about Enron, WorldCom, et al, or suggesting doing anything about the problems their collapses exposed. Lip service, but that's it. But lip service and military power won't work anymore. And the markets know it.






Russian economy growing rapidly.

Reuters reports in the Moscow Times that Russia's economy is expected grow at a rate exceeding 6% in the first nine months of 2003. Which is even more impressive than it sounds, since that's over the 2002 rate, which itself was quite good.








US leader in world arms sales.

The NY Times reports that the US remains the number one arms dealer in the world, especially in the sales of arms to what they call developing nations.


Hopefully none of these will ever be used against Americans, but I wouldn't hold my breath. There is some good news however. It would seem that overall arms sales worldwide are declining, not increasing.





Court blocks anti-telemarketing bill.

Reuters reports that, at the last minute, a federal court has blocked enforcement of the anti-telemarketing bill, which would have allowed people to stop unsolicited calls to them.


I wonder if the (corporate-controlled) courts will also block recent legislation banning spam under some dubious free-speech provision. I think they might have to since the same principles applying to spam would also seem to apply to traditional junk mail, and in fact, all advertising in public spaces.






Virtual corporate slavery spreading.

Via Common Dreams, is an article The Price of Dignity by Anita Roddick detailing the accelerating spread of virtual slavery around the world. I'm a little skeptical of blaming it entirely on China, but that does seem to be the fastest growing area at the moment.


While "evil" corporations certainly share a lot of the responsibility, I can't help but feel that American workers and labor unions could be doing a hell of a lot more to organize and fight this. But instead they just want to portray workers in other countries as the enemy, and focus on their own immediate short-term interests. Not just cutting their own throat but that of everybody else's as well. Sad. Ms. Roddick doesn't even mention American unions, but toes the "blame-the-corporate-for-everything" line that so many progressives and liberals use today to avoid accepting responsibility for their mistakes.

One interesting thing the article shows is that jobs are moving from countries such as Mexico to even poorer countries. That should put paid to the notion that NAFTA is to blame for the loss of jobs, since there is no NAFTA with these other countries. But it's a convenient political buzzword in the US, so I guess they'll continue to use it. But repealing won't bring a single job back to the US. Not one. It'll just drive them even further away.






IMF says dollar could collapse at any moment.

Guardian article. The IMF's chief economist says that the "colossal" American trade deficit could cause the dollar to collapse at any moment.


They also report that old-fashioned attitudes within the Eurozone would continue to stifle growth there.


I find the phrase "once-mighty dollar" rather succinct.






Scotland's top earners.

The Scotsman is running a series on the top 100 earners in Scotland. It illuminates several important economic trends. Artists and athletes are doing very well, but those doing best are those who provide basic everyday needs. And those doing the worst are the techies and computer types. Yes, the very worst.


The list is being released in parts, and the top earners are not yet identified. But I'll bet the number one is J.K. Rowling. Certainly writers and musicians are doing very well. Especially considering their industries are not considered "real" businesses and receive virtually no serious investment, or any of the long-term financial management and planning that other industries receive.


And while sports are doing well, they foresee some problems in this area.








Fabulous Farm Aid concert.

Via Common Dreams, Harvey Wasserman reviews the recent Farm Aid concert.


More information about Farm Aid is available at www.farmaid.org. It's a good cause to support.






Argentina defaults on IMF loan, but growth continues.

The Economist reports that Argentina has defaulted on a large payment due to the IMF, despite what they describe as "the economy bouncing back quite strongly."


I think this notion that credit is essential to a government, or a business for that matter, is a bit obsolete. In the old economy, an economy of scarcity, capital and credit were essential. But in the new economy, an economy of affluence, cash is cheap and abundant. People have been financing enterprises on a pay-as-you-go basis for millennia. The economics of it are quite sound, and the savings from interest are enormous.

I know that in California, a lot of the budget crisis stems from overcheap money, and how easy it's become for a government to borrow money. It just results in politicians not confronting difficult choices, but passing them on to later generations. And it results in incredible amounts of money being paid, perennially, for interest. Money that could much better be spent on the state's needs.

But the IMF and the other bankers make their living lending money. That's all they do. So they constantly claim that there simply isn't any other way to operate. That this is a basic economic law, and can't ever be changed. But they're wrong.

Another point they may be missing is that Argentina doesn't necessarily need to be doing a great deal of business with the US and Europe. There's a growing economy in global south that offers plenty of business. I'll bet that they are more concerned with trade with Brazil than with the US. Maybe not yet, but the trend is in that direction.

To their credit, the Economist article does point out that the IMF stands to lose as much as the Argentines here.


In a way it reminds me of the situation with Iraq. For all of its global power and wealth, when it comes down to it, the IMF can no more force the Argentines to play by its rule than the US can force the Iraqis.

And, by the way, if Argentina's $14 billion dollar debt is so staggering and dangerous, then what about America's multi-trillion dollar one? The article points out that Argentina is in the same class as Zimbabwe, Liberia and Sudan. If you just look at the figures so is the US; with Japan not far behind. America is the world's biggest debtor.






A farewell to Japan.

Jonathan Watts has been living in Japan for 13 years and covering it for the Guardian for the past few years. In an article, Japan Slips Into Cozy Retirement he reflects on his years there and the changes he's seen in the Japanese economy. It's a sad story, but well worth a read.


A good read. He's now moving to become their correspondent in China, where the action in Asia is now. For more on Japan, see the Guardian's special report on Japan.






Buying peace and tolerance.

Two articles in the Guardian struck my fancy. Entirely different problems and parts of the world, but the same approach: giving money.

This one, by Cesar Garcia, reports on the Columbian governments new plan to buy peace by paying soldiers on both sides to stop fighting.


An expensive approach though, and one that doesn't address the roots causes of the wars. Although in Columbia it would appear that the fighting has taken on a life of its own, and that it's no longer about anything but survival and profit.

The other article reports, by Gary Younge, on a pastor in Louisiana that is attempting to address the segregation in southern religion by simply paying white people to come to its services.


And I guess I could also mention the American government's decision to pay $30 million reward money to those who helped capture Hussein's sons. Money is an awfully strong incentive sometimes, that's for sure. For most people anyway. But not true believers. True believers are willing to even pay to die for their cause.

"For fifteen hundred dollars, you can have anybody killed." -- Bob Dylan, I forget the song.



Amazed at the effort behind a web site.

After transferring everything over, and redesigning the sites and such, I'm again amazed at just how much work and time-consuming details are involved in getting a good-sized site up. Goodness. It just eats up the time.

I guess it's worse for me since I'm an eternal perfectionist and can futz forever, but even so it's a real challenge. Trying to deal with PERL, PHP, mySQL, MovableType, the browsers, Mac and Windows, mail settings, domain name stuff, nameservers, and on and on and on.

I don't think I'm going to be redoing this one for quite a while. Will add on to it, but I think I'm going to let well enough alone.

I must say that the software is starting to get very good and even well documented. Movable Type is very well done, and with good documentation and online support as well. So is the forum software, Invision Power Board. My new domain hosts, ipowerweb.com are also pretty good, with extensive user control over the settings and good help. I'd recommend any of them. I also use easyDNS.com for domain name management. They're really good as well.