Monday, November 12, 2007


Dollars To Donuts

While the subprime meltdown and the subsequent havoc it is causing on Wall Street has dominated the headlines, the collapsing dollar hasn't gotten nearly enough attention.

That's beginning to change. The New York Sun discusses it in light of an exchange from this summer between Ron Paul and Fed Chief Ben Bernanke. The Sun notes that in July Paul was using the word "crisis" with respect to the dollar. Bernanke didn't see a crisis. The paper also surmises that Paul's prescience may be an explanation for his "surprising" campaign:
[W]e're of the view that it relates to the substance. We have a lot of differences with Mr. Paul, but on monetary matters, we've been covering him since his days, in the early 1980s, as a member of the United States Gold Commission, when he coauthored, with New York's own Lewis Lehrman, a minority report favoring a return to a version of the gold standard. What can be said about Mr. Paul is that he's not only ahead of Mr. Bernanke but also of his fellow Republicans, and he will eat into their standing until they address the question of the soundness of our currency.

Clearly, Paul's principled stance against the war has a lot to do with it, but he is also the only person -- in either party -- talking about what to some is economic arcana.

On Sunday, my colleague Braden Keil addressed at length the real-world impact that the dollar imbalance is having on the New York economy -- as Europeans gobble everything up at (for them) rock-bottom prices:
While it's positive for jobs that foreign money is pouring into our restaurants, hotels, retail stores and real estate, it's also pricing us out of our own market. Everything - from rentals to luxury goods to meals - is being kept artificially high by foreign visitors. That $50 entrée? Chump change to someone who got $2 for every pound they brought through customs. And don't think that the housing dip affecting the rest of the country means you might finally be able to afford a place in Manhattan - or even Brooklyn. Europeans are snapping up the “sales."
Many on the left have decried what they see as America becoming "Walmart Nation" -- meaning that the Superstore's low prices that undercut the competition is driving "Mom and Pop" stores out of business. But, one could also say that the dollar fall has created a different form of "Walmart Nation" actually turned the U.S. into one large Walmart -- "always low prices."

Given some of the dire concerns raised in another Sun column, the end result of these trends may mean that, contrary to what the conventional wisdom driving the present political debate suggests, Iraq may actually rank a distant second to the economy as the critical issue in next year's election.

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