Our economic quagmire-- Boston Globe

[TexasLawyer]

Our economic quagmire

By Robert Kuttner | December 2, 2006

EVEN IF you are not planning an (ever more expensive) European trip any time soon, pay attention to the decline of the dollar. It could portend deeper trouble for the economy.

The dollar just hit a 20-month low against the euro. It now costs $1.32 to buy one euro, and the dollar is falling against other currencies as well.

The greenback is sinking mainly because the United States runs an immense trade deficit with the rest of the world, especially East Asia. Countries like China, Korea, and Japan have an unhealthy co dependency with the United States. Their governments help their industries capture leadership in technologies, products, and jobs. They then sell America far more then they buy. However their central banks happily lend those dollars back to us, so that we can finance the trade deficit and keep buying their exports.

We now owe foreigners more than $1 trillion , about half of it to central banks. Our annual trade deficit is over 7 percent of one year's Gross Domestic Product, and it keeps growing.

<snip>

Robert Kuttner is co-editor of The American Prospect and a senior fellow at Demos. His column appears regularly in the Globe.

© Copyright 2006 Globe Newspaper Company.


Edited to add link: http://www.boston.com/news/globe/editorial_opinion/oped/articles/2006/12/02/our_economic_quagmire/

[Deja Q]

1. In the 1990s, freepers kept blaming Clinton for not doing anything...

A fair criticism.

Where are those same folks now, I wonder?

[Democrats_win]

3. Tragedy is that this borrowing isn't doing anything for most Americans.

In fact many Americans are doing much worse. The top 20% of Americans account for 60% of consumption according to "The Economist" magazine. They call it a "plutonomy" which is a combination of the words plutocracy and economy. Yet these same people write LTTEs claiming how important bush's tax cuts are. They don't get it; those tax cuts are ruining America so that they can have a few years of luxury living. For many Americans those tax cuts are doing absolutely nothing.

[Warpy]

2. Gee, you allow megacorporations to ship all the factories

(along with the paychecks) offshore and then go DUH when the trade deficit continues to climb?

When are these yahoos going to realize that we've offshored too much of our vital industries? We no longer have sufficient industry to survive the next big war: no cloth, no shoes, few electronics, few replacement parts for cars, airplanes, and even washing machines, and even fewer and fewer drugs that allow a lot of us to stay alive.

I would strongly suggest they look outside the working class consumers for someone to blame for the trade deficit.