Monthly Archives: January 2008

Blackwater Protesters Given Secret Trial

I’m too much of a chicken-shit to comment on this:

Hugo Chavez Calls for Anti-US Alliance

Maybe Canada should consider joining this group as part of our action plan against the Harpies?

I can think of worse alliances to have!

I’ve read about what’s being called the Bolivarian Alternative for the Americas, which is ALBA in Spanish. Right now, it’s a small group, but with Venezuela backing it with trillions in oil revenue, look for this to make the news more often as they recruit countries like Chile, Argentina and maybe even Brazil.

Research Credit: WRH.

Amero – “Fix The Loonie”

I love it. An article in the National Post by economist Herbert Grubel (a senior fellow at the Fraser Institute and educator at the Chicago School) calls for Canadian politicians to “fix the loonie“.

I wonder: has Mr. Grubel not seen the equivalent of the charts that were posted earlier?

Does he really take Canadians to be that stupid?

Please. Stop already.

Tying our currency to a sinking ship is like … well, tying your currency to a sinking ship. A connection with the US dollar would guarantee that we go down with them and that we forever doom our manufactured goods, commodities and other products to economic oblivion.

The better way: disentangle ourselves from the US and reduce our dependency on them. Trade with more stable countries like Venezuela and Western Samoa.

US Dollar Index

Many people ‘wow’ themselves with the price of oil, the Canadian exchange rate and the price of other ocmmodities like gas, wheat, soya, gold, etc.

For a long time, I’ve been saying that these changes have a lot less to do with economic miracles embedded within each of these commodities. Sure, there have been disturbances, but nothing on the scale that would support consistent increases in prices that we’ve seen over the course of the last 8 years.

So, to prove this point, I did a little digging related to the US dollar index. This is a basket of currencies weighted to reflect the ‘true value’ of the US dolar vis-a-vis a number of different currencies. The data for this little project is from the Federal Reserve Bank of Atlanta.

Here’s the chart from January 1995 to December 2007:

US Dollar Index, 1995-2007

It’s a pretty neat triangle, isn’t it?

I zoomed in from the beginning of the Bush Jr era to the present and I got the following:

US Dollar Index, 2001-2007

As you can see, the US dollar has been in a freefall since Joonior took office. There are a number of reasons for this:

  1. General global lack of confidence in unreliable economic theories
  2. Outrageous levels of overspending, particularly on defense
  3. The desire to have the rest of the world subsidize American consumption

Now, looking at a chart like this, you’ve got to think for yourself: “it has to rebound”.

If the Dems takeover, it might, mainly because they’ll have to reign in spending. The money institutions will start calling in their loans, taxes will have to rise, interest rates will increase, capital flows will stop and people will hate the Dems again, but for all the wrong reasons.

If the Republicans win (my bet is McCain), spending will continue to go through the roof and the US dollar will resemble a third-world currency in free fall, continuing the global subsidy to the American ‘standard of living’, assuming of course, that it’s individuals that benefit from falling prices (which they won’t) and not the MegaMarts that sell more crap to them (which they will).

In the coming weeks, I’ll try to put together some “quasi-indexes”, which will be comparisons of the US dollar index to various commodities. From there, I’ll attempt to get a sense of how much this dollar drop has cost the Canadian in terms of lost opportunity.

How Bush Destroyed the Dollar

From Paul Craig Roberts, the Assistant Secretary of the Treasury in the Reagan administration, we get this interesting review of the current US economic situation:

If the US government cannot balance its budget by cutting its spending or by raising taxes, the day when it can no longer borrow will see the government paying its bills by printing money like a third world banana republic. Inflation and more exchange rate depreciation will be the order of the day.

Now that Bush has done completely the opposite, I’m going to go long on the call that the US dollar will continue to plummet.

What does this mean for Canada? For starters, since we’re the largest supplier of oil to the US, we should price our oil in Canadian dollars. Other commodities should follow the same route. If that’s not satisfactory, we should at least pick a basket of currencies from countries that aren’t lead by people who could care less about the value of their currency.