Archives: 2007 September

Friday was a day that the American Dollar really got pounded on foreign exchange markets. The US Dollar Index closed at 77.69, a new all time low.

Vice President “deficits don’t matter” Dick Cheney seems to once again be very wrong. But what would you expect from a man who reportedly wants the US to attack Iran after achieving such stunning “successes” in Iraq and Afghanistan? However, one does have to give the man credit for being consistent with his views and pronouncements. Not one has yet to match up with the facts.

The world foreign exchange trading community, the one that really matters when it comes to currency exchange rates, seems to think that deficits without end, reckless spending, constant expensive warfare, and the creation of money from thin air do matter.

Foreign exchange traders are being as democratic as one could ever hope for in expressing their opinions about American policies by voting with their currencies.  Votes are cast by selling Dollars and buying Euros, Swiss Francs, Yen, Canadian Dollars, Australian Dollars, and even Thai Baht and Brazilian Reals. Then there is gold and silver.

All of the above are in major up trends while the poor USD is getting clobbered. Ever since the USD broke 80 on the USD Index the downtrend has accelerated. While not yet quite a collapse the threat of a destabilizing Dollar collapse is real and perhaps not far away.

As an American why does a weak Dollar matter to you? For one important thing a collapsing USD would lose its status as the world’s premier reserve currency. The privileged status that the Dollar has enjoyed since WW II has made it easy for the US to finance vast amounts of debt. This ability to constantly pump up the money supply has most certainly contributed to the growth of the American economy.

Should a rapid collapse of the Dollar lead to its loss as the preferred reserve currency around the world the US will have great difficulty in financing its bloated requirements at reasonable interest rates, if at all. The result will be a sharp increase in US interest rates, the contraction of business activity, and a clear and present danger of a depression, not only in the US but around the world.

Should the US somehow be able to avoid the worse that could happen from a Dollar collapse there will still be unpleasant consequences. Americans who travel abroad have already experienced a roughly 20% increase in expenses over the past year as the Dollar continued its fall. For example, with one Euro now worth about 1.4250 Dollars it has become painful for an American to travel to Europe. That means you will receive only about 0.7017 Euro for each Dollar that you exchange.

For those Americans who live overseas but depend on income earned in Dollars or pension and social security payments  the fall of the Dollar has already added to their cost of living by 20 to 25% over the past year or two.  This makes life particularly difficult for retired Americans who are on fixed incomes denominated in US Dollars.

“Mobs, Messiahs, and Markets” by William Bonner and Lila Rajiva. Surviving the Public Spectacle in Finance and Politics.

William “Bill” Bonner is the President and CEO of Agora, Inc. , a leading financial newsletter publisher. One of the better known financial newsletter publications in the world is “The Daily Reckoning” and is published by Agora. Bill frequently shows off his considerable writing skills by writing feature articles for The Daily Reckoning.

Lila Rajiva is an author and political journalist who wrote “The Language of Empire” , which analyzes the media coverage of the US in Iraq Abu Ghraib prison scandal.

In “Mobs, Messiahs, and Markets”,  Bill and Lila use their rare and skillful writing talents to corroborate on a book which examines the way that humans act in crowds and are influenced by the actions of groups and voices of authority. One of the conclusions is that  individuals in crowds often lose their ability to think independently and will engage in actions, at times even violent and foolish ones, that they would never undertake on their own.

This adaptation of a crowd or mob mentality spills over into almost all that we do and is especially evident in the world of politics, financial matters, and public opinion. People will believe the craziest things if they are presented as being a popular and accepted belief.

Mobs, Messiahs, and Markets is a good entertaining read that explores serious minded material in a way that will often make you laugh out loud. However, the result of reading the book is far more useful.

After a thoughtful read you will be better able to defend yourself against the nonsense put forth daily by market shills, talking heads, media outlets, and sadly your own government. The spin masters know how people’s thinking can be manipulated and used to their advantage. Mobs, Messiahs, and Markets provides you with the tools to think for yourself.

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Blackwater is a well connected US security and personal protection company that has trained the world’s largest private military mercenary force. The Blackwater mercenaries have gained enormous power and influence during the Bush administration’s invasion and rule of Iraq.

Blackwater has received contracts from the US Department of State totaling over 600 million dollars to provide security to US VIPs in Iraq and has reportedly recently signed additional contracts to provide security worth several hundred additional million.

Founded in 1997 by a former US Navy Seal Blackwater has attracted top notch highly trained former military special forces, Navy Seals, and Delta Force types, as it pays very well for those with highly developed military combat skills. A Blackwater employee can make five to ten times the pay rate of US military personal for performing basically the same duties. As far as I know Blackwater has not lost a single VIP while that VIP was under their protection.

While this is an outstanding record in such a dangerous environment as Iraq and Afghanistan, Blackwater has been involved in several incidents in which they have been accused of being trigger happy and of using excessive force.

Blackwater executives point out that earning a high income by serving with Blackwater is not without risk. Blackwater has had over 30 of their security personal killed in Iraq, which indicates that at times they have little choice but to shoot it out against insurgent forces.

Blackwater has been in the Iraqi and world news lately for allegedly gunning down anywhere from 11 to 28 Iraqi civilians, the reports vary widely, in a shoot out last Sunday at a Baghdad intersection. The North Carolina-based company, which has been hired by the US State Department to guard American diplomatic staff in Iraq, as well as to provide security to visiting VIPs such as visiting Congressmen, has said its employees acted in self-defence.

The Iraqi government at first issued an order for Blackwater to suspend operations in Iraq stating the the company acted recklessly and fired upon Iraqi civilians without any provocation, but quickly backpedaled as the US Department of State quickly came to the aid of its client.

Blackwater is just one of many US backed organizations, including the US military, that have been placed out of reach of Iraqi law by Order 17.

One of Paul Bremer’s final acts in his role as head of the Coalition Provisional Authority in occupied Baghdad was to sign a document that is a throwback to the age of colonialism. The fact that the US under the guise of promoting freedom and democracy could force such a one sided document down the Iraqi’s throat shows who was and who truly still is in control of a “free Iraq”.

The following is an except from an article at Tomdispatch which discusses Order 17 in some detail.