Wednesday, January 15, 2014

The Incredible Dollar, I: The Situation


A couple of weeks ago we got an e-mail from a correspondent in Brazil, an American clergyman who has retired there.  The clergyman (we’ll call him “HH”) made the following comments (anything in brackets is something we inserted for clarity):

Dear All:

I'm inclined to believe that the dollar as the world's [reserve] currency is losing its credibility.  Brother, you know that recently the place where I have been exchanging dollars for years here in Brazil, for reales (the Brazilian currency), no longer accepts dollars, but does accept euros, etc.  So, I'm forwarding this "presentation" to see what all of you think about it.

HH

Norman Kurland, CESJ’s president, had this to say in reply:

Dear HH:

What happened to you reflects the growing fact that the U.S. dollar is in the process of losing its position since the Bretton Woods Agreement in 1944 as the reserve currency for the rest of the world.  The underlying cause for the problem is the growing loss of respect for the stability of value of the real goods and services that can be exchanged for the U.S. dollar.  As such, this reflects the uncertainty about the negative trends in the U.S. economy as a whole based on mounting annual deficits and unsustainable and unfunded long-term liabilities of the Federal Government of over $127 trillion (see the "National Debt Clock") or $1.1 million per taxpayer.

We can get out of the mess by reforming the system comprehensively as proposed by the Capital Homestead Act.  Other countries will see the point and follow the new Just Third Way model of genuine market-based economic democracy.  Pope Francis's dream of bottom-up economic participation and empowerment of all citizens, from the bottom-up, will be realized.

In the meantime, I have no other suggestion but that you bring the problem to the attention of the U.S. Embassy in Brasilia, hoping that they will exert enough U.S. political leverage to persuade the Brazilian Government (who have the power through the Central Bank of Brazil) to stop discriminating in favor of the Euro against U.S. currency.  The Euro economy is at least as vulnerable as that of the U.S.

Norm

That was a pretty good response, but we thought more could be added.  So we added more — which constitutes tomorrow’s posting.

#30#

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