Two weeks ago The Chinese Premier Wen Jiabao warned the US to take care of the dollar and be careful not to debase the US currency. The problem for the Chinese is that they ow hundreds of billions of dollars and any move on the downside from the dollar can cost them a fortune. At this moment they ar in between are rock and a hard place, the Chinese should have been wiser with their money, I do not see how they can avoid losing money on this deal. The US in the meanwhile, a few days after the Chinese Premier's statement decided to print more dollars. Last week Ben Bernanke announced he would buy mortgage backed securities, and also start buying treasuries to manipulate the market and lower interest rates on mortgages. It is just a matter of time, inflation will take off in the US like a rocket. A country cannot generate that much money out of thin air (trillions and trillions) and not duffer any debasement of their currency.
Lately we have gotten used to figures like billions and trillions, but how much exactly is one trillion?? Here's an example:
Let's start with money. Let's imagine that you have a fantastic job that pays you one dollar for every second you work. (As you will see, there are people who get paid more than that.) There are 60 seconds in a minute and 60 minutes in an hour. If you were only getting paid for as 40-hour work week for all 52 weeks of the year, you would still be getting paid $7,488,000 in a year. And if you were getting your $1/sec rate for every second of the year, you would take in $31,536,000 for the entire year. At that rate, to earn a trillion dollars, you would have to work more than 31,709 years! And even if they magnanimously paid you $1,000/sec, it would still take you more than 31 years to earn that first $1 Trillion. They say the war in Iraq is costing taxpayers about $2 Billion dollars per week. There are 3,600 seconds in an hour, 24 hours in a day, and 7 days in a week for a total of 604,800 seconds per week. At $2 Billion per week, the Iraq War costs us over $3,000 every second! Can I borrow a couple of bucks for the rent this month?
Now going back to the statement that Ben Bernanke made about the dollar, after he made this statement Gold jumped up about $70/Oz, oil also went up, and the dollar index (who measures the strenght of the dollar as compared to a basket of currencies) went down from 87 to about 83 points, this is a big change for one day. Our honorable president promised change, but are we really seeing any change? You be the judge, the government keeps handing money to broken institutions, keeps bailing out people that did not do their homework before buying a house, and keeps handing huge bonuses to the same individuals that got us into this mess. To end this blog I just want to touch on the topic of the bonus to the AIG executives. I do not agree with the compensation, and certainly hate seeing incompetent people getting richer, however, it would not be consitutional to tax the bonuses, that would stand against everything that the US stands for, free trade, democracy and capitalism. It is up to every individual to decide whether to return the money or not, but to tax them would be a big big mistake, it would open the door for other kinds of interventions from the US government.
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