Quote from Mad_Alfred:
First of all, a "shout out" from an ex-Nassau County resident.
A friendly challenge to your argument, however.
There are many who blame the decline of the dollar on the growing U.S. debt - which is certainly aggravated by the expense of the Iraq War - which was a distinctly Bush decision. Hard to argue that a Gore presidency would have us in Iraq.
Following this train of thought, there are many that blame the decline in the dollar for the increase in oil prices and commodities in general. This would lead, at least in part, to the hardship the OP introduced for discussion. By this train of thought, you ignore a very big economic elephant in the room.
*** Not interested in a Republicans are great (or evil) vs. Democrats are great (or evil) debate - so all of you hardcore politicos can stand down and give your keyboards a rest. ***
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In summary, Monty, do you agree that the Iraq War expense has pressured the US Dollar lower?
If not, what has?
Do you believe the theory that the lower US dollar has fueled higher commodity prices - oil in particular? If not, what has?
From what I hear, Nassau Ct. is experiencing perfect cookout weather this weekend. Hope you get a chance to enjoy it.
Later,
MA
Thanks for your insightful comment Mad Alfred. I actually think the entire neo-conservative driven War on Terror has been a disaster, has made the world a more dangerous place now than before 9/11, and surely has great economic reprecussions for the United States. I also agree with you that high commodity prices, particurarly oil, has been the result of the falling dollar. I would also add that speculation similar to that of the dot.com bubble is an equally significant factor.
I understand that your arguement is mostly derived from the fact that the dollar has been falling in value. While I also believe that the wars in Iraq and Afghanistan have contributed to the rise of our national debt and thereby a declining dollar, I think there is one factor that you have left out in your analysis. The actions of the FED!
IMO the dollar would not have declined against other world currencies so dramatically if the FED did not constantly lower interest rates. Obviously when the FED does so, the dollar goes down in value the vast majority of the time. That being said, we must ask why the FED has continously done this. While the War on Terror may be one cause, the overwhelming reason responsible for this action has been the subprime mortgage issue. The Financial Sector has been hit as a consequence of making risky and overtly aggresive decisions/investments. Bear Stearns for example has always had a reputation for being exceptionally aggressive and now they just recently paid for it. The Financial Sector unfortunately has also driven down other sectors. Attempting to stop this decline, the FED has cut interest rates to revitalize the economy and boost confidence in the markets. This strategy relates to the Keynsian theories of government spending and regulation in the economy. It is failing miserably, however. Every time the FED cuts interests rates, the dollar falls. The Iraq War is not the reason why the Fed does this, but rather the subprime mortgage issues. That is the reason why I am an advocate of Austrian School of Economics: no government intervention in the markets. Furthermore, I have been traditionally Republican because individuals like Reagan endorsed this principle. I am a fiscal conservative, but could care less about social issues like gay marriage and so forth. Bush IMO adheres to a new, and unproductive, breed of conservatism. As much as I hate the position religion takes in politics, Bush's bigger faults are the wars in the Middle East and spending like crazy.
In sum, the declining dollar has certainly contributed to the gap between the rich and poor and to the reduction of the middle class. That being said, the FED has cut rates not because of the War on Terror, but rather because of the subprime mortgage issues. Therefore, the blame should go to actions of the FED. Their policies have incredibly short term affects in the market.
Also, it is incredibly hot today in Long Island thereby making up for the light rain we had earlier this week. Ironically, I also planned to have a bbq tonight.