Honey, I shrunk the dollar!

Early on, at the dawn of George Bush's struggle to become President, he made a point of sticking out his chin and insisting that he stood for a strong dollar. No doubt it was, like most of his statements, made because strong sounds good and dollar sounds American, but ever since, his administration has supported a weak dollar. In this one respect, they have had a measure of success. Every administration in at least the last 30 years has actively bought in the market to support our currency. Bush has not. The dollar continues to fall.

The US Dollar hit a new low against the Euro yesterday and it now takes more than two dollars to by a British pound. Weak sounds bad, of course and it's a word that Bush only likes to apply to his enemies, but the weak dollar may be behind whatever optimism prevails amongst the foreigners who own our debt and much of our assets. Bush cheerleaders persist in telling us that the economy is booming because the Dow keeps rising and it is booming because Warren Buffet and Bill Gates are getting tax cuts, but perhaps the only honestly healthy sign is that exports are up because American goods are now more competitive abroad. Americans still prefer anything foreign, but that's for reasons of snobbery and credulity. American Airplanes, tractors, soft drinks, weaponry and heavy equipment are selling much better than they did.

Foreigners are buying American securities too. Witness the record Dow Jones numbers last week. Some Americans will benefit, but since only about 3.8% of Americans have seen any real wage escalation, does this really make the DJIA an indicator of economic health? The homes that Americans have been borrowing against to finance an exuberant life style are now declining in value and are expected to continue in that direction, fuel costs are up and probably will continue to rise indefinitely and our growth rate is the lowest in five years. The promise that our military adventure in Iraq would generate a net profit, or at worst break even, is now believed only by those few in the White House bunker or perhaps in padded cells. The rest of us compare Iraq to a black hole. Yet "consumers" seem optimistic. Some still support Republican economic policy - in as much as one can be said to exist.

I'm not in the prophecy business and for no less of a reason that I have no idea what's going to happen, but I'm still looking at all the corners we're promised we will soon be turning and I'm waiting for the Piper to be standing there, invoice in hand. I fear there will be a point at which the weak dollar will become too weak. Equities will be dumped, interest rates will climb, banks will foreclose, inflation will inflate.

Of course, and as usual, the very richest of the rich; the people for whom the game is rigged will benefit while the serfs will suffer. Perhaps it's only a question of when.