Politics and Other Dirty Words, Late February 2004

It’s (Still) the Economy, Stupid

It’s been a good week for those in the anyone but Dubya camp. The field of democratic contenders has narrowed considerably, which is probably for the best. Barring strange happenings in Wisconsin, the saga of Howard Dean’s meteoric rise and fall will be history by the time you read this, allowing the Democratic party will be able to cease it’s auto-flagellation long enough to assemble a reasonable ticket for November. Meanwhile, public confidence in the Bush administration is eroding faster than a calved iceberg. So much information about Halliburton’s looting of the defense budget is emerging that the question isn’t whether or not a HB related scandal will bring about Cheney's purging, but which scandal will it be?

On the war front, our wartime president is increasingly finding it hard to look much like either a warrior or a president. More than half of the electorate now believes that Dubya lied about Saddam’s weapons of mass destruction. Sensing that this might cause a problem in November, the president went on Meet the Press to clarify his position. His conversation with Tim Russert was only slightly more coherent than Hunter S. Thompson checking into a Las Vegas Hotel with a head full of acid. Even diehard Republican and former Reagan speechwriter Peggy Noonan said the president’s candid chat – and I’m paraphrasing a bit here – sucked. (She caught some flack from the dwindling GOP faithful for that. Still, way to go Peggy!)

I mention these things only as talking points; we will no longer be going after the low-hanging fruit in this column. Of more far reaching importance is the question of what in the hell is happening to the US dollar?

The reader will forgive me if I digress. Sometime around Christmas, thanks to an advantageous bargain made with a drunken German backpacker, I found myself in possession of four crisp new 50 Euro notes. I was going to exchange them for greenbacks, but held on to them instead. It was a wise choice; barely two months later, they’re worth 25% more. And judging by the way things are going, they’ll be worth still more down the road.

So just why is the dollar falling, and how does this reflect on the current state of the American economy? Not knowing that much about global economics myself, I posed the question to a friend who’s well versed in the nuances of global trade and currency, asking him to explain in laymen’s terms why the US dollar is pulling a Titanic against the Euro. This is what he said:

"Broadly, the value of the Greenback is based on the confidence people have in it. If your country is being run by idiots, people might be more comfortable holding Yen, Euro, or anything else."

In other words, enough of the people who control the global flow of money (and it’s strictly business with these folks - national pride and political ideology don't much apply) see the current economic direction of the United States, with a government that is simultaneously hell bent on spending money, cutting taxes, and raising a historically unprecedented debt as a bad investment.

Big investors (who need a place to keep their money just like anyone else) are looking at the economies of the US and the EU, and deciding that they’d rather stash their cash in Euros than Dollars. There are, of course, plenty of variables and nuances. But the key point is that the once mighty American dollar is dwindling rapidly in value.

Is there a silver lining? Sure, for the American export sector – as the dollar loses value, it makes American products cheaper overseas. But its a slim lining indeed; we’re currently running a record trade deficit, importing close to 500 billion USD more than we’re exporting. As the dollar drops, import items get costlier. Think about that next time you’re shopping for something for something made outside of the US (except for Chinese products, as their currency is still pegged to ours – but if the Bush Administration has its way, not for long.)

Before entering politics, Dubya had been a businessman. He bought a baseball team and ran it into the ground. He ran an oil company and jumped ship just before it tanked. One of the promises he made when he was inaugurated was to run America like he’d run a business. Unfortunately, it’s the only promise he wound up keeping.

C 2004 Joshua Samuel Brown