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Get Ready to Meet the Euro
Cat : Euro/ Dollar
Date : 2005-09-22 17:05:02                      Reader : 346

Get Ready to Meet the Euro
by Victor Thorn

If our economic situation is in such dire straits, some may wonder how everyday Americans have managed to survive for this long, especially when we consider President Bush’s convoluted policies where he refused to veto even one spending bill in over four years while spending more than any other administration in history. The answer to how we’ve been able to at least reasonably maintain our standard-of-living lies in three different areas: low interest rates, tax cuts, and slave labor.

Here is how all three factors fit together. First, for the past 5-7 years, banks (via low interest rates) have been literally giving money away to anyone that could sign their name on the dotted line. The benefit of such a policy has been a huge influx of money into the economy, especially in the housing market. Regrettably, this housing boom has created a bubble during the past decade (similar to the craze of the 1990’s) where costs have risen at a rate of 35% above inflation. On top of that, since borrowing money became so easy, many people who lost their jobs to outsourcing were forced to refinance their original home loans. Such a scenario wouldn’t be such a problem if it weren’t for the fact that a considerable number of these re-fi’s were made under variable (not fixed) terms. Thus, when interest rates begin to climb (as they inevitably will), mortgage payments will shoot through the roof, leading to waves of foreclosures for those who can’t meet the demand.

The second way we’ve been able to preserve the way of life we’ve grown accustomed to is via cheap imports from China and other Asian slave-labor markets. Such a phenomenon, of course, resulted from the rampant outsourcing created by corporate America, who sold our country’s soul down the drain when they went overseas. So what we have is a double-edged sword, for with the loss of high paying jobs in both the blue and white-collar sectors to overseas serfs (many of whom make less than a dollar-an-hour), U.S. workers are undeniably bringing home less money. But, since the key to our capitalist system is to consume, consume, consume; Americans are still able to get their microwaves, DVD players, and cell phones at Wal-Mart for dirt cheap prices because they’re made in Asian sweatshops by robotic slaves.

Lastly, to keep the Machine running so that people will CONSUME, George Bush’s handlers, in an act of desperation, arranged for him to cut taxes. Now, if you don’t think the power elite are running scared, ask yourself this question: how often do banks virtually give money away via rock-bottom interest rates, while at the same time the federal government gives money back to its subjects rather than taking it away? It’s unprecedented, and a sure sign that the last vestiges of this system are being dragged along until the bitter end (when a new era will begin).

And what would this “New Order” entail? Well, in a nutshell, here’s how things could shake-out. First, since foreign entities need to stockpile our money in order to buy OPEC oil, and since they hold so much of our debt; if they determine that the dollar is no longer a sound investment, they’ll dump it in favor of the euro, which will become the world’s new reserve currency. If this transformation takes place, a collapse in our economy will surely result, causing interest rates to rise to offset the devaluation of our dollar. With the cost of money suddenly higher, those with variable interest rates will find it increasingly harder to meet their mortgage payments. Plus, since less money is now in circulation, the inflated housing market will collapse like a deflated balloon.

But that’s not all. Considering that our money is not worth as much as it used to be (i.e. inflation), foreign countries will finally demand payment on the debts they’ve been holding. In addition, because our money is devalued, once cheap imported products will now be more expensive, thus canceling-out the Wal-Mart factor. This scenario could be offset by a lower price for our exported goods, but since we’ve already outsourced nearly all of what constituted our manufacturing base, we don’t have as much to sell because China and the other slave-labor markets have filled that vacuum. Thus, all of these factors – the higher interest rates, housing collapse, outsourcing, and the abandonment of foreign investors – will have a dramatic affect on the stock market, which will not be able to sustain such multiple blows.

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