America for Dummies

One thing you can say about us Negroes is that most of us care and know more about the 2-pac sex tape, the Michael Jackson voluntary manslaughter trial and the BET hip hop awards than events that actually have an impact on our present and future lives such as the European sovereign debt crisis.

Not to be sarcastic, but the economic crisis in Europe is tenfold more important and impactful on the lives of African Americans because it directly impact how much money we have in our pockets, more so even than the supposed jobs plan proposed by the president. Like our economy, the major participants in the European Union, mainly Germany, have implemented another temporary fix to stop the hemorrhaging via a new bailout package. We tried a bailout here under Bush and Obama, the second of which resulted in a loss of 2.5 million more jobs and more paper money added to the economy albeit liquidity was never at issue.

In theory, the goal is to calm markets and to isolate the problems of Greece from the rest of the EU and subsequently the rest of the world, most importantly the US. But this can never happen when you add Ireland, Spain, Portugal, Italy and even France into the mix. The simple truth is no matter how much money stronger European nations throw onto the already massive debt, it will not help and result in more debt, like any pyramid scheme does.

Seeing the unrest in Greece, the demand for additional collateral from Finland and backroom deals that want bankers to take a large reduction of the value of their Greek bond holdings to reduce their national debt, what we may see in the next coming weeks may be more problems for global markets. It hard for at least me to see why hasn’t dumping all of this bailout money on the problem has not resulted in a drop in the credit rating for countries like France and Italy, especially when countries like Venezuela, who have 60 billion or more in surplus, have lower ratings than the aforementioned.

It is apparent that Greece will eventually default and Germany will be put in a position to protect its banks first and for the record, we do not know or at least I cannot discern how much loot French, Spanish and Italian banks have on hand to do the same let alone how much US exposure exist with our big insurance corporations and all. If this does happen, it would not be unreasonable for one to speculate bank failures in Europe leading to a global sovereign debt and banking crisis simply due to not knowing the value of all the varied derivatives and complex papers banks around the world hold.

And back to Germany, if rumors hold true and they reinstate the Mark, debt will continue to accrue because without the existence of a single EU bond, there is no mathematical way to support the massive debt in the EU’s struggling markets. We may see some evidence of such now for just this week we saw France and Belgium guarantee the financing of the troubled cross-border bank Dexia, as its shares plunged just on reports that it will be broken up.

I could go one for days but in simple terms several things are true. The people of the bailout giving nations from Germany to Finland do not want to bail out Greece and other struggling national economies in the union. Second, all that is being done is to the benefit of creditors and foreign investors and not to address the structural impediments at the root of the current crisis. Last, if a bank like Dexia cannot survive, which is the leading provider of local government financing in France, the it will be only a matter of time before other French banks, who currently buffer the crisis nations from the rest of the EU will become insolvent. Why, because the worsening of the European sovereign debt crisis and the tensions on the interbank market means that all of the world will have a clear picture of how troubled non-strategic assets weigh on EU banks as a whole regardless of what country they are located in.

I admit I am no economist, just a reader and a free thinker. Math is my tool and although I cannot say who is the rapper of the year, or who is brought out in the Jackson trial, I don’t need too because it does not and will not impact my life more than what I see occurring in Europe. Maybe someone should write a book for me and call it “America for Dummies” to help me out. Or better yet, I should write that book, for only a nation of dummies would pay more attention and be more knowledgeable of pop culture garbage that doesn’t have a real significance on their survival than event that do.

The World Economic Collapse explained in 3 minutes

ink and paper

Now I really wanted to call this post “Uncle Tom’s Dollar”, but I wanted to show I am not as uncouth, incorrigible and uncultured as I really am. Plus, If I did, I would have to point out how dumb and stupid and ill informed the folks many who may read my blog get they news from (folks on Fox and CNN) really are and I did not want to insult their ill informed and poorly readness (yep I made the word up). Besides I’m sure folk on TV have to spend their time looking at the cathode ray tube unlike me who would rather read a coupla few books and newspapers a week – especially when I don’t have to have a person select and pick what they think I want to hear or worse need to know. Now I have learned from my prior post that folks don’t like reading, even if it is between a page or two in length, and have limited knowledge of history. Well really, I have observed such and have not learned anything whatsoever for I am about to do the same thing again.

I have an affinity for loot, money, the dollar bill. But slowly I am loosing that affinity for it is not able to buy as much as it used too. Frankly I am afraid for if it keeps loosing its ability to get me the things I want, or if I have to use more of them to get what I want, then I speculate we will miss no longer being on a gold standard. I could go back to the Romans, or Hungary or even Serbia to explain what I see from what I know has happened in the past, but I wont. But I will say that what we are experiencing is eerily similar to what happened in Germany before the rise of Hitler and even more recently what has been going on in Zimbabwe. Zimbabwe is the first country in the 21st century that I know of to suffer from hyperinflation. On one extreme, which is extreme, we may find ourselves in the same position of Zimbabwe with respect to their hyperinflation. True, we aint taking land back from white farmers and giving to poor folks who don’t know how to run large farms and end up mismanaging them. But Obama is dead set on this redistribution of wealth as was (is) Mugabe. In Zimbabwe (a place I have been and surprisingly makes great wine also) put so much into spending on printing loot. Why, because the demand for cash was so great. Here, just like there, the depreciation of assets is way greater than investment, which led the to import capital from abroad.

This is very scary for a few reason, namely because they had to replace the Zimbabwe dollar with a foreign currency that was fully backed by a foreign reserve currency freely convertible at a fixed rate on demand. It was so bad there that commercial banks maybe in a position to issue their own private notes without government regulation (as was the case here before the civil war prior to Lincoln issuing the Greenback).

The Germany situation is a lot more closer because the devaluation of the Mark they suffered was the result of waging a war they loss (can you say Afghanistan and Iraq). After WW 1, Germany had to make reparation payment as well as keep its industrial economy running. Problem was that they were no longer on the gold standard. When mark lost value, corporations cut jobs, paid workers less and produced cheaper goods for exports. This is especially true when there is in an economic crisis or a war, the pressure to inflate becomes overwhelming.

Now I don’t THINK we are or will be experiencing hyperinflation. But I do several things I have observed now and before in history. One, that as in Germany, retailers shelves are not selling and are not as stocked as before the recession, meaning its hard for us to make a profit. Two, I see more empty commercial real-estate. Three, the government has no adequate income thus I think will be forced to raise taxes (which they will not collect given the present climate and will have to print more money or worse borrow more abroad).

In essence our government will monetize debt. I mean what else can you do when we build a big azz deficit. All the Federal Reserve does is buys bonds trying to stabilize the market, which means they just printing loot on the invisible security of these bonds. If history teaches anything, it is that government cant be trusted to manage loot as this clock shows with respect to the US. When currency is not redeemable in gold, its value depends entirely on the judgment and the conscience of the politicians. All money is a matter of belief and the Obama administration shows a willingness to tolerate a weaker currency in an effort to boost exports and the economy as long as it doesn’t drive away the nation’s creditors. Problem is that world wide folks getting rid of dollars with the quickness. Even here in the states. Banks are increasing foreign currency holdings and since 1999, holdings in US Dollars have dropped from 63 percent in 1999 to 37 percent currently. Yep, the dollar is almost worthless, but why shouldn’t it be, after all its just paper and ink.