By all accounts, President Barack Obama will refocus in his 2011 State of the Union address on “jobs and competitiveness.” One must hope he succeeds. But Treasury Secretary Timothy Geithner’s previews strongly suggest that both men are unaware that these two problems are essentially unrelated, and that even with continued economic recovery, Obama won’t propose the two measures that would cut unemployment sharply and start to reverse the decline of U.S. manufacturing: reversing recent extensions of unemployment benefits from 26 to 99 weeks, and negotiating the end of the dollar’s role as chief official reserve currency. Geithner regards the first as “stimulus” and the second as unthinkable.
As the chart below shows, the decline in the U.S. overall net investment position by 30% of GDP almost exactly matched the decline in U.S. net monetary reserves (U.S. foreign official assets minus liabilities). Yet by the latest figures, U.S. net private assets were in surplus by about 7% of GDP. This proves that the U.S. loss of competitiveness is entirely due to financing Federal deficits through foreign monetary authorities. The next successful U.S. president will implement both reforms.
Will America start prospering again — as it has not prospered for over a decade? Likely yes. But not without a fight. Now that Jim DeMint has raided Steve Moore from the Wall Street Journal that card might be Heritage Foundation vs. the White House. Could be big.
John Holdren, now Obama’s White House science advisor, 40 years ago termed America “overdeveloped.” Holdren co-authored a 1993 book, Human Ecology: Problems and Solutions, with Anne and Paul Ehrlich reportedly saying that, “A massive campaign must be launched to restore a high-quality environment in North America and to de-develop the United States….” (Emphasis supplied.)
As a soldier of France, no one knew better than Professor Jacques Rueff, the famous French central banker, that World War I had brought to an end the preeminence of the classical European states system and its monetary regime, the classical gold standard. World War I had decimated the flower of European youth; it had destroyed the European continent’s industrial primacy. No less ominously, the historic monetary standard of commercial civilization had collapsed into the ruins occasioned by the Great War. The international gold standard -- the gyroscope of the Industrial Revolution, the common currency of the world trading system, the guarantor of more than one-hundred years of a stable monetary system, the balance wheel of unprecedented economic growth -- all this was brushed aside by the belligerents.
Publisher's Note: Originally released in June/July of 1991, this detailed report discusses Jacques Rueff's economic theories and applies them to modern economic events.
By John D. Mueller
Reply to Polyconomics - Part 1
Having demonstrated that the World Dollar Base “works,” and having explained in detail why it works, we turn finally to answering Wanniski and Goldman.
Wanniski delegates most of the Polyconomics’ attack on LBMC to David Goldman. Strange to say, it is necessary to answer Wanniski and Goldman separately. This is because their arguments against LBMC’s monetary approach are not only different, but mutually exclusive.
"Commercial banking grew out of the desire (inspired by the profit motive) to conserve cash (gold) and by means of credit to provide financial elasticity and growth in the commercial process of exchange. That is, all producers (sellers) who desired true money (gold), instead of the short-term secured credit bills – promissory notes of their customers (the buyers) – could, through the mediation of goldsmiths-turned-bankers and bill-merchants-turned-bankers, obtain real money by discounting their bills of exchange for gold with the emerging commercial bankers of early modern Europe. The combined institutions of stable money and secured credit enabled commercial civilization to make of the entire world the only closed economy."
For years, Castro’s Cuba has exported communism. The exports continue but the economic crows have come home to roost...even while Cuba’s economy floats only because of the generosity of Venezuelan oil exports.
Ironically, as Cuba has fallen apart, admirers of its economic mismanagement have kept the country from going bust. Keith...
Argentina is floundering. Brazil is struggling. Colombia is growing. Colombia is now the third largest economy in Latin America, according to Capital Economics. The Wall Street Journal’s Darcy Crowe and Taos Turner wrote recently: “After Argentina’s economy dwarfed Colombia’s for decades, economists say the trend reversed in January as the...