“An economist is a man who states the obvious in terms of the incomprehensible.” - Alfred A. Knopf
“An economist is an expert who will know tomorrow why the things he predicted yesterday didn't happen today.” - Laurence J. Peter (1919 - 1988)
“Did you ever think that making a speech on economics is a lot like pissing down your leg? It seems hot to you, but it never does to anyone else.” - Lyndon B. Johnson
“A banker is a fellow who lends you his umbrella when the sun is shining and wants it back the minute it begins to rain.” - Mark Twain
“I see Johnny with his head hanging down
Wondering how many schillings left in that pound
Cost of living it is rising so high
Dollar see that have heart attack and die
Bills and budgets are waiting
Finance ministers anticipating
Unemployment is rising
And I hear my people, they're crying”
I love reggae music so much that I could listen to it all day long. The reason might have to do with the sheer staying power of that genre of music. Reggae is about as old as yours truly; that may also explains why I love it so much. It is also no exaggeration that reggae is the only music that ever stamped a nation authoritatively on the world map. The Caribbean Island nation of Jamaica (population 2.7 million) is a reggae-invented nation. The irony is that Jamaica became world famous for a music that was invented in the United States.
This is what one music authority wrote: “The word "reggae" was coined around 1960 in Jamaica to identify a "ragged" style of dance music, that still had its roots in New Orleans rhythm'n'blues. However, reggae soon acquired the lament-like style of chanting and emphasized the syncopated beat. It also made explicit the relationship with the underworld of the "Rastafarians" (adepts of a millenary African faith, revived Marcus Garvey who advocated a mass emigration back to Africa), both in the lyrics and in the appropriation of the African nyah-bingi drumming style (a style that mimicks the heartbeat with its pattern of "thump-thump, pause, thump-thump"). Compared with rock music, reggae music basically inverted the role of bass and guitar: the former was the lead, the latter beat the typical hiccupping pattern. The paradox of reggae, of course, is that this music "unique to Jamaica" is actually not Jamaican at all, having its foundations in the USA and Africa.”
Among the world superstars Jamaica has given the world were Bob Marley (whose ‘One Love’ album Time magazine voted: ‘The Album of the Millennium’), Jimmy Cliff and the great wordsmith, Peter Tosh, from whom I borrowed the title of this article from his 1979 album, ‘Mystic Man.’ For those not versed in reggae-speak, I intersperse the lyrics within this piece.
So what has all these got to do with the declining dollar?
Few years ago, one would have been considered absolutely insane were he to predict that the United States dollar would become a currency that would become a pariah currency – shun by all and sundry. In pre Warlord Bush’s world, the American greenback was the world’s pre-eminent currency. From Alaska to Zimbabwe, almost everyone would give an arm and a leg or both for a handful of greenbacks. No more. The US dollar is now being spurned like a leper. No one wanted the dollar anymore.
Hit by a free fall with no end in sight, the once mighty U.S. dollar is no longer just crashing on currency markets and making life more expensive for American tourists and business people abroad; its clout is evaporating worldwide as foreign businesses and individuals turn to other currencies.
Experts say the bleak U.S. economic forecast means it will take years for the greenback to recover its value and prestige.
Negative dollar sentiment is growing in nations where the dollar was historically accepted as equal or better than local currency — and dollar aversion is even extending to some quarters in the United States.
In Manhattan's Bowery district, Billy LeRoy, the owner of Billy's Antiques & Props, prefers payment in euros so he can stockpile the currency for his annual antique buying trip to Paris.
"Whip out dollars at the French flea market now, and they'll shoo you away," he said at his store near apartment buildings where Europeans are snapping up units because they've become dirt cheap. "Before it was like the second coming of Christ, but now they don't want it or if they do take dollars, they're going to take their pound of flesh."
"You have the U.S. still holding this trade deficit, but now you have the possibility of a U.S. led recession, and you have a weakening currency. So it's a very dark outlook for the dollar," said Gareth Sylvester, senior currency strategist with the British firm HIFX Inc., which executed $40 billion in currency trades last year.
Nations that were once seen as incredibly risky for investments — such as Brazil — are now seen as good long-term bets. And countries such as China and Russia, with burgeoning coffers of money to invest abroad, are thought to be shifting some of their reserves or diversifying fresh income to destinations and currencies outside the United States.
It used to be important for most countries "to accumulate dollars as a precautionary element against rainy days, but the accumulation of reserves has become so large in most emerging market countries that the balance is way beyond what's needed for precautionary reasons," said Eliot Kalter, a fellow at Tufts University's Fletcher School of Law and Diplomacy and a former International Monetary Fund official.
While most experts believe the dollar will eventually regain strength, no one is willing to predict when that will happen.”
“Tell me brother
Is there something I can do
Don't you let frustrations make you blue
Time is hard
And I know that is true
But if you pick yourself up
That's all you've got to do”
The war against Nazism (they call it World War II) in Europe comprehensibly wrecked the economies of Europe. After the epic battle, European economic infrastructures lay in ruins and both the victorious European nations and the vanquished Germans were heavily indebted. It was left for the United States, the principal member of the allies, to bail out its friends through the Marshall Plans. The program was a generous scheme that gave out loans and grants that enabled Europe to regain its economic standing. The war also effectively ended Europe’s cynical rule of the world. The British Pound Sterling was the world’s currency and was the standard of world’s trade through the sterling Standard. But Britain emerged from the world badly bruised, and there was nothing sterling about the pound. The Yankees were the only true winners of the war of fury among the Europeans which killed an estimated 22 million people.
The Americans took up the challenge of rebuilding the battered world economy and it made eminent sense that they tried to rebuild it in their image. The US dollar naturally slides into position as the world’s currency. It became the currency of choice for bankers, traders, financiers and speculators. Almost everything that makes the world’s commerce traverse smoothly is traded in the American greenback. From pork barrel, to wheat, to automobile, to crude oil, it’s the almighty dollar all the way.
“Things can be much better
If we can come together
Long time we been divided
And it's time we be united
The day the dollar die
Gonna be better
The day the dollar die
I won't need no pockets
The day the dollar die
Don't have to be frettin'
The day the dollar die”
But a currency, any currency, is as strong as the productivity of its nationals. The American dollar was strong because American workers were the most productive in the world. American factories and workers were churning out more industrial output than the rest of the world put together. From automobile to sewing machines, to machine tools, to electronics to jets, America led the way.
Somewhere along the line America became too well-fed, complacent and outright lethargic. And sadly Americans stopped reading such classics like Paul Kennedy’s, ‘The Rise and Fall of Great Powers.’ The Europeans picked themselves up from the ruins of war and rebuilt their industries and start to compete with their benefactor\saviour. Then the Asian miracles happened as one Asian country after another became industrialized and start churning out industrial marvels at unbelievable prices. The Japanese learnt car building from the Americans and about twenty years later started to outperform their masters - see David Halberstam’s brilliant book, ‘The Reckoning: The Challenge to America's Greatness.’ Today, a Japanese company, Toyota, leads the world in car production.
“Now I see you standing on your feet
And you can also make two ends meet
Never you let life problems get you down
There is always a solution to be found
Bills and budgets are mourning
Finance ministers groaning
Unemployment is rising
And I hear my people crying from the ghetto”
As the Asians muscled in every industrial area, America retreated. The Asians had two advantages Americans can never hope to match: a vigorous Confucian work ethics and low wages. Asians products simply under-priced Americans out of world’s market. If you cannot beat them, goes a saying, you have to join them. With no hope of ever competing with an aggressive Asia, American manufacturers moved their factories abroad. This has the effect of further compounding American woes: the USA became a net importer of trade. Americans developed an insatiable appetite for foreign goods. As Americans start to consume more and more imported goods, the US trade deficit widens. Of course, since there is no such thing as a free luncheon anywhere, American trade bills piled up to astronomical levels. To finance these escalating trade deficits, successive US governments started borrowing from left and right. The result is a vast fiscal deficit that was allowed to widen by governments unwilling to tell their citizens some simple home truths.
Before long, America leads the world only in the production of war toys. To all intent and purpose, the land that boast of being the only superpower (hyperpower, says some) became an economically-crippled giant bristling with space-age weapons. Whilst the Asians concentrated on producing useful consumers’ goods, the Yankees spend their energies and monies in building stealth bombers that cost upward a US$ 1 billion apiece and more esoteric weapons whose price tags remain classified.
There is still another dimension: As the Asians took over the commanding heights of industrial production, the US retreated into what became essentially a service economy. Instead of Engineers, American universities start churning out increasing numbers of lawyers, management gurus and financial wizard. Instead of producing tangible goods, these clever graduates start scheming how to produce raw cash from thin air.
It was due largely to the brilliance of these financial wunderkinds that the fiction of prosperity could be maintained over the years. These gurus (by the way, why are people who manage money called ‘brokers?’) sold the dummy that the US was a rich country. The illusion could be maintained because America, the leading imperialist nation, effectively runs the Breton wood institutions and also the World Trade Organisation. These institutions are the instruments through which the West maintains its stranglehold on the rest of the world. The World Bank and the IMF continue to ensure that the poor countries continue to fund the US gluttonous appetites through low ‘world’ prices for their produce and paying usurious interests on their crippling debt burden. Another reason has to do with the saying that if you borrow someone a small amount you created a debtor, but if you lend someone who sums, you created a partner. The Asians have to continue to fund Americans insatiable appetite for foreign luxuries because they have so much investment portfolios in the US. The last thing they want is for their biggest debtor to default.
When Warlord George Bush decided on launching his insane wars on Afghanistan and Iraq, he grossly over-estimated his nation’s abilities and misunderstimated (I am borrowing his word here) his opponents’ capacity to fight back. The projected quick-war refused to materialize and four years thence, US forces are still bogged down in what is effectively a quagmire. And at US$12 billion a month (Iraq) and US$65,000 per minute (Afghanistan, according to Oxfam), it surely has been a costly enterprise. Some estimate put the total cost of the mis-adventures at US$3 trillion.
Among the wondrous marvels produced by America’s financial magicians was the now discredited subprime lending. The very name (sub and prime, ah!) is suspect. Subprime lending was an instrument American financiers concocted to lend money to anything that looks remotely human. By lending unsecured loans to all and sundry to buy houses, the illusion of a booming mortgage sector was successfully created. The brand new house-owners used their houses to finance other pet projects – mostly consumables. To finance these consumptions, the bankers once again chipped in by creating new instruments to help those who has great ambitions to put debt nooses on their necks. Two of these new debt instruments (bonds) are (1) Collateralized Debt Obligations (CDOs) and (2) Structured Investment Vehicles (SIVs).
These are just useless pieces of worthless papers backed only the uncollateralled mortgages. It is these same junk sheets that Americans sol d across the global financial system. It explains why many bankers develop instant ulcers the moment Americans start reneging on their debt. And there were many who believe that it is not only Wall Street that should be having all the fun; many Americans simply stripped themselves of the moral obligation to pay back their debt. For those that need help on reneging on their debt, some clever folks set up a website to lend a helping hand. This is the url: http://www.youwalkaway.com/) .
An old English bank, Northern Rock, famously collapsed and had to be taken over by the British government. And on eof America’s blue chip Company, the investment house, Bear Stearns, ignominiously fell. Banks from Accra to Zurich who had bought into these useless pieces of paper are posting huge losses. Central banks in the capitalist world are pressing their printing presses into overdrive; printing more and more cash to bail out insolvent banks.
One would be right to ask why the West which always preaches free market is not allowing the free market a free rein as they keep preaching to those of us in Africa. For close two three decades now, the Breton Wood institutions has being given us lecture about the sanctity of a mirage called ‘free market.’ We now know how hollow and ridiculous those claims are. Billions upon billions of dollars have been allocated by Western Central bankers to shore up ailing banks. Yet, when few years down, the bubble hasn’t burst and Wall street was posting impressive profits, the greedy bankers awarded themselves US$300 billion in bonuses within a three year span. Today, no one is asking them to refund the money they scammed (what else to call it?) from investors.
You can fool some people some time, but you cannot fool all the people all the time. Our elders say that the house built with spittle will be fell by the dew. The spectacular bubble created by Wall Street scam artists collapsed stunningly sometime in early 2008. The result is an economic meltdown the likes of which has not been seen since the Great Depression of the 1930s. Of course, the US and the patriotic media continue to try to maintain the fiction that this is just a blip.
“The day the dollar die
It's gonna be nice
The day the dollar die
Just you wait and see
The day this here dollar die
There be no more inflation
The day the dollar die
I say the day Danny dollar die
The day Sammy dollar die
We will love each other
I said the day this a dollar die
Fight some inflation”