It has been reported, and disputed here, that the drop in the value of the dollar will provide a stimulus for exports that will offset the decline in the domestic economy. The report above, reporting on the sharp downturns in american manufacturing, indicates that the "stimulus in exports" theory has failed.
This flows from the fact that the weakness of the dollar reflects more concerns than just the imbalance in trade and declining value of the dollar. Dollar weakness also reflects a global lack of confidence in the role of US manufacturing and trade strength vis a vi the emerging manufacturing, technology, and consumption powerhouses of china and india.
Despite the precipitous drop in the value of the dollar, american manufacturing, even utilizing illegal labor, providing minimal benefits, and paying no taxes still cannot compete with the slave-labor like laboring conditions in the state-sponsored industries of china and india. American manufacturing and exports have proved themselves unable to offset the economy's domestic decline.
Global market concerns about the american economy have extended outward from the value of the dollar, and now the central role of the US economy in global markets is being questioned.
The sub-prime debacle has damaged the US's role as the financial center and leader of global finance. The Fed's response, cheapening the dollar and bailing out the thieves, will not repair america's central role in global finance, or shore up the credit line required to maintain ourselves as the biggest consumer of the world's resources.
The depth of our economic and political irresponsibility have put the dollar beyond the point where the fed could meaningfully support the value of the dollar, or dictate the interest rates on dollar denominated lending. The global markets and global creditors perceive that the US economy presents risks that now include deepening asset depreciation, severe economic downturn, and continued loss in the value of the dollar, all sitting atop a massive american consumer and business debt of dubious value. These factors are causing rates to remain high independent of the fed's rate reductions and liquidity moves.
Combined with the fact that we can no longer cover the vast debt that is funding our previous consumption with a line of new credit, the already significant pressure in global markets to devalue the dollar is now being highlighted by american manufacturing's inability to pick up the slack through exports.
At this point the solution to our impending crisis is not visible to the economists, financial players, or the politicians. Their basic assumptions about never ending growth, consumption, and profit make it impossible for them to identify themselves as the real problem, or recognize the illegitimacy of their political power and economic policy.
The solution to our economic problems does not lay in the economic sphere. it sits in our ethical world view.
The root of our economic problem is that we have lived our lives for the last 35 like we were on one big shopping spree, assuming that endless growth in population, consumption, profits, and asset values was a fact of life, and reflected our wisdom and justice.
Our social, economic, and environmental breakdowns are signaling that our ethical, political, and economic assumptions have been fatally flawed, and we have been neither wise nor just in how we have led our lives.
Our fundamental misperceptions about the nature of life have opened the doors to global economic, political and military chaos, not to mention our impending environmental disaster. This, my friends, is an ethical crisis, not an economic crisis, and it can only be addressed politically.
We are far beyond the point where a set of economic adjustments or regulations, or even resource wars, will prop up our flawed assumption that growth and profit are endless, or prop up the tottering global empire that funds our consumption. It is our assumption of endless growth that is dying a bloody death before our eyes in iraq, and in our financial markets.
The requirement to address the essential ethical problems underlying our economic problems will emerge only as our assumptions of endless growth and consumption fail. This process of failure is in mid-flight.
Our pursuit of endless irresponsible growth has already gutted our domestic polity. It has killed our schools, drained our water and energy resources, and has imbalanced our domestic distribution of wealth enough to have made a mockery of our democracy.
Our basic assumption of endless growth is the walking dead, and will soon topple into the grave it dug for itself during the last 35 years of irresponsible growth. The shopping spree is over. There is no solution to the economic problems we face, short of taking our medicine.
At present, our corrupt politicians and Fed officials are trying to restart the speculative bubble that brought us to the brink of chaos, seemingly unaware that it is both impossible and unwise.
It also appears the era of the businessman is over, but they are too blind to see it as they continue to lead us towards the cliff. The logical question this brings to mind is, "What will replace meaning in our lives when the flow of ever increasing production, consumption and profit stops?"
The answer is ethics. Our failures came about because one part of our society, the wealthy, have floated our elections on a sea of bribes. They have used their wealth to dominate political funding, elections, and subsequently dominate the production of law and policy.
It is going to take the combined wisdom of our country to properly address, if not undo the damage our wealthy have done to our country by looting our government, our infrastructure, and our economy. They have run every aspect of our country into the ground.
If we want to bring the combined wisdom of our country to bear on our problems, we are going to have to restore our democracy. We must stop wealth from twisting our government to its service. This is the only way we are going to create laws and policies sufficient to deal with the problems our corrupted government has brought upon us.
To fix our problems we must restore the fundamental assumption of our democracy, that our government is determined by, and run for the benefit of all, rather than the few, and based on the rights and responsibilities of each.
Only then will we be able to draw the wisdom of our nation into politics to bear on our economic crisis. Only after we put our ethics before our profits will the practical solutions to our problems emerge.
If this impending economic crisis sparks the rebirth of our democratic principals sufficiently evolved to defeat the modern terms of tyranny our corporate consumer aristocracy has imposed on our country, history will say that we turned a profit from this crisis, despite changing the global climate, the mass extinction we triggered, our bloody wars, and the trillions of dollars that are about to disappear.
U.S. Trade Deficit Widens, nyt, 1-12-08
A brief history of our recent meltdown and its causes: three essays
Feds Bail out Greedy Speculators, 8-17-07