# Does Bush attack the world because the status of the US $ is threatened? **URL:** \ **Category:** Great Debates\ **Created:** [April 29, 2003, 8:03am UTC](https://boards.straightdope.com/t/does-bush-attack-the-world-because-the-status-of-the-us-is-threatened/171872 "2003-04-29T08:03:43Z")\ **Posts on this page:** 10\ **Page:** 3
**Author:** ![jshore](https://avatars.discourse-cdn.com/v4/letter/j/b5e925/32.png) [@jshore](https://boards.straightdope.com/u/jshore)\ **Post date:** [April 30, 2003, 8:14pm UTC](https://boards.straightdope.com/t/does-bush-attack-the-world-because-the-status-of-the-us-is-threatened/171872/41 "2003-04-30T20:14:47Z")
> [@](#): > > \*Originally posted by John Mace \* > BTW, regardless of how much the gov’t cuts your taxes, you are free to send in more if you feel the tax cut was “crazy”. In fact, you are free to send in more even w/o a tax cut. Considereing that you could count the number of people who do this on one hand (with a few fingers missing), I have a hard time taking serious anyone who claims taxes are too low. That’s a silly argument. These are issues that must be dealt with collectively through the political process. Of course, on the individual level, each person wants to pay no taxes and have the government provide them with wonderful services (“Lord, won’t you buy me a Mercedes-Benz?”). It’s the classical “free loader” problem. The question that must be decided through the political process is how much taxes are needed and who should pay what and what services are needed and for who, etc. On the individual level, my sending the government an extra $1000 isn’t going to do much to improve our society. However, us collectively deciding that people like me don’t need $1000 in tax cuts and putting that money to other uses (whether it is tax cuts for those who most need it, services for those who need it, or just lower the deficit) would do quite a bit. ---
**Author:** ![pantom](https://avatars.discourse-cdn.com/v4/letter/p/34f0e0/32.png) [@pantom](https://boards.straightdope.com/u/pantom)\ **Post date:** [May 1, 2003, 1:37am UTC](https://boards.straightdope.com/t/does-bush-attack-the-world-because-the-status-of-the-us-is-threatened/171872/42 "2003-05-01T01:37:16Z")
Well, I don’t know if this conspiracy theory has any validity, but the dollar has been falling rather precipitously over the past year, as you can see by this chart: [http://quotes.ino.com/chart/?s=NYBOT\_DXY0&v=d12](http://quotes.ino.com/chart/?s=NYBOT_DXY0&v=d12) As I write this, the dollar is at a four-year low, according to the financial news. Given that both Europe & Japan are not really doing all that great economically, I think the only real answers to why the dollar is falling are: 1 - the spree of war and tax-cut related deficit spending we’re now embarked on, and 2 - the loss of confidence in the U.S. politically as a result of this Iraq venture. Notice on the far right hand corner of the chart how the dollar peaked in the second half of March and has been falling ever since. Seems to me that’s a pretty good barometer of the world’s opinion of the war on Iraq. ---
**Author:** ![Marley23](https://avatars.discourse-cdn.com/v4/letter/m/45deac/32.png) [@Marley23](https://boards.straightdope.com/u/Marley23)\ **Post date:** [May 1, 2003, 1:48am UTC](https://boards.straightdope.com/t/does-bush-attack-the-world-because-the-status-of-the-us-is-threatened/171872/43 "2003-05-01T01:48:07Z")
Even I am not going to say Bush HAS done this. But I would say that he has reserved the right to in that he has said he will act preemptively not just to defend the US itself, or its troops or citizens abroad, but also its economic interests. ---
**Author:** ![flonks](https://avatars.discourse-cdn.com/v4/letter/f/3ab097/32.png) [@flonks](https://boards.straightdope.com/u/flonks)\ **Post date:** [May 1, 2003, 12:03pm UTC](https://boards.straightdope.com/t/does-bush-attack-the-world-because-the-status-of-the-us-is-threatened/171872/44 "2003-05-01T12:03:45Z")
> [@](#): > > \*Originally posted by Marley23 \* > \*\*Even I am not going to say Bush HAS done this. But I would say that he has reserved the right to in that he has said he will act preemptively not just to defend the US itself, or its troops or citizens abroad, but also its economic interests. \*\* So, basically you are saying, that Bush is allowed to go to war to against other countries killing thousands of people to defend the economic interests of the US? And here we are talking about an economic advantage which is not evident by itself. It was the choice of the countries of the world to chose the US dollar as global currency, and I think it is their natural right to reverse that choice. Regardless of the truth of the theory, you tell us, that Bush is allowed to wage war for the sole reason to prevent countries taking legal economic measures which could harm the US, and if it is just something as to remove an advantage it had until now. Wow. I am impressed. ---
**Author:** ![Marley23](https://avatars.discourse-cdn.com/v4/letter/m/45deac/32.png) [@Marley23](https://boards.straightdope.com/u/Marley23)\ **Post date:** [May 6, 2003, 4:13am UTC](https://boards.straightdope.com/t/does-bush-attack-the-world-because-the-status-of-the-us-is-threatened/171872/45 "2003-05-06T04:13:48Z")
I have absolutely no idea what you’re getting at. And I wasn’t saying what Bush is allowed to do and what he isn’t. I told you what he’s said. And I even flat-out said I didn’t think that was the motivation or reason for what’s been happening. ---
**Author:** ![system](https://global.discourse-cdn.com/straightdope/original/2X/e/e489c3b7d8fce19c4b355dd4fc3f88cc39c34b87.png) [@system](https://boards.straightdope.com/u/system)\ **Post date:** [May 6, 2003, 7:56am UTC](https://boards.straightdope.com/t/does-bush-attack-the-world-because-the-status-of-the-us-is-threatened/171872/46 "2003-05-06T07:56:56Z")
> [@](#): > > \*Originally posted by pantom \* > Well, I don’t know if this conspiracy theory has any validity, but the dollar has been falling rather precipitously over the past year, as you can see by this chart: > > [http://quotes.ino.com/chart/?s=NYBOT\_DXY0&v=d12](http://quotes.ino.com/chart/?s=NYBOT_DXY0&v=d12) > > As I write this, the dollar is at a four-year low, according to the financial news. > Given that both Europe & Japan are not really doing all that great economically, I think the only real answers to why the dollar is falling are: > > 1 - the spree of war and tax-cut related deficit spending we’re now embarked on, and > 2 - the loss of confidence in the U.S. politically as a result of this Iraq venture. Notice on the far right hand corner of the chart how the dollar peaked in the second half of March and has been falling ever since. Seems to me that’s a pretty good barometer of the world’s opinion of the war on Iraq. I think you have a point, although it’s in part. The dollar has been overvalued on a number of bases, e.g. purchasing power parity, for quite a stretch now. However it’s value has been propped up or sustained by large capital inflows to the United States in the past decade, esp. in the 1998-2001 period. Those inflows were driven by the perception of lower risk in the United States and better returns, above all in the securities markets but also in other areas. Rather obviously such perceptions, driven by the stock market bubble and the general investment bubble in the US economy, have not panned out. Further, US interest rates are quite low, from a foreign perspective especially. We may add to this that the perception of risk for many investors in re US assets has also increased markedly, partly due to more or less economic issues such as Enron and the bursting of the myth that US corp gov was worlds away better than the rest of the world, partly for quasi-political reasons, e.g. there seem to be sustained capital inflows to MENA from Gulf investors afraid for their assets inthe US, with no doubt reflows to Europe. It may be that other investors are losing an appetite for US assets for similar reasons, if the perception that the US is willing to seize assets for political reasons grows, although at present I think this is minor and exaggerated. Further, US expansion experience for many Euro firms has not been as profitable nor as happy as originally thought when the investment was made. There is also a perverse self-reinforcing mechanism in the exchange rate trend (with certain bounds obviously), the weaker the dollar, the weaker returns look, in the near and perhaps medium term, for the foreigner – that $10 profit ain’t worth quite so many Euros. Thus the economic drivers for the capital inflows have slacked off. Higher perception of risk on a number of fronts (economic and political risk), much worse than expected returns on most assets classes all are turn offs – in addition in times of generally higher perceived risk, people tend to stick to home markets for their investing – stick with what you know in effect. What effect on USD? Well, you know I am sure that we are a net debtor – American savings rates in the aggregate are at historic lows, so in order to finance both Government spending (investment and consumption in the deficit) and private investment, we need to borrow / buy savings from abroad. That means exchanging dollars for something else. Now, since we are going strongly into deficit again, on the government side, and not saving very much in the private sector (although also not demanding so much capital for investment either), obviously we’re trying to pull in quite a lot of capital – while at the same time the offer is declining. Martin Wolf (my single favorite columnist) in The Financial Times had what turns out to be a highly prescient analysis back on 7 Jan 03, which I quote in part: > [@](#): > > Foreigners are exposed to growing risks, particularly the exchange rate. Rationally, they should want, among other things, a good chance of a big real appreciation and not, as at present, the reverse. > > For these reasons, a move away from US assets by foreign investors and so a repricing of the dollar seem highly plausible. Indeed, that has already been happening. Between 2000 and the first three quarters of 2002, foreign private purchases of US assets fell from $978bn to $560bn (at an annualised rate). Foreign direct investment fell from $308bn in 2000 to an annualised rate of just $14bn in 2002. This has also been associated with dollar weakness. Against the euro, for example, the dollar has lost 20 per cent of its value since July 2001. > > The decline in the dollar is likely to be reinforced by the perceived need for the US trade deficit at least to stop growing. But the US trade deficit is large and the ratio of exports of goods and commercial services to GDP is low, at some 9 per cent of GDP. As a result, imports are about 40 per cent bigger than exports. If imports grow at 6 per cent a year and the trade deficit is to stabilise as a share of GDP, exports need to grow, over the rest of the decade, more than 7 per cent a year, in real terms. If the trade deficit is to halve, exports must grow at 9 per cent. > > This needs far more than a recovery in the rest of the world. A reduction in the US trade deficit by contraction of domestic demand alone would also mean a slump. Under plausible assumptions, the absolute reduction in demand would have to be many times as big as the desired reduction in imports. If this disaster is to be avoided, the exchange rate must fall, to switch demand from imports towards domestically produced goods and switch demand in the rest of the world towards US exports. > > That depreciation would also need to be large, because the US is a large economy in relation to the rest of the world, and has a small export sector in relation to its own economy. If the reduction in the US trade deficit had to be in the order of 4-5 per cent of GDP, the depreciation required might be as big as 30-50 per cent in real terms. In the short run, moreover, such a depreciation would worsen the current account. That might well create a big exchange rate overshoot. > > Yet the east Asian economies, particularly China and Japan, will resist any appreciation. Japan has been accumulating reserves at an extraordinary rate: last November they were $460.5bn, up $58.5bn since the end of 2001. This leaves the euro. Again, any further appreciation would be hugely unwelcome. It could force big policy changes on the European Central Bank. But it could also create a crisis, particularly in Germany. > > The superpower is living on borrowed money and borrowed time. Its rake’s progress cannot continue for ever. But how and when it will end remains disturbingly obscure. As you see, Wolf feels that given the current situation – and I may add here we see a real threat from the fuck you policies of the Bush Admin in building up bad-will among our major trading partners and fellow developed economies – has some significant risks for something of a currency crisis, although as obviously this is probably something that will be addressed. Will it be addressed in a positive framework? Well, given the record to date…. ---
**Author:** ![OliverH](https://avatars.discourse-cdn.com/v4/letter/o/278dde/32.png) [@OliverH](https://boards.straightdope.com/u/OliverH)\ **Post date:** [May 6, 2003, 9:49am UTC](https://boards.straightdope.com/t/does-bush-attack-the-world-because-the-status-of-the-us-is-threatened/171872/47 "2003-05-06T09:49:26Z")
> [@](#): > > \*Originally posted by Collounsbury \* > \*\* > As you see, Wolf feels that given the current situation – and I may add here we see a real threat from the fuck you policies of the Bush Admin in building up bad-will among our major trading partners and fellow developed economies – has some significant risks for something of a currency crisis, although as obviously this is probably something that will be addressed. Will it be addressed in a positive framework? Well, given the record to date…. \*\* I found the article quite interesting. I wonder if you know of Emmanuel Todd’s book “Apres l’Empire” and what you think of his hypotheses? ---
**Author:** ![system](https://global.discourse-cdn.com/straightdope/original/2X/e/e489c3b7d8fce19c4b355dd4fc3f88cc39c34b87.png) [@system](https://boards.straightdope.com/u/system)\ **Post date:** [May 6, 2003, 9:52am UTC](https://boards.straightdope.com/t/does-bush-attack-the-world-because-the-status-of-the-us-is-threatened/171872/48 "2003-05-06T09:52:48Z")
> [@](#): > > \*Originally posted by OliverH \* > \*\*I found the article quite interesting. I wonder if you know of Emmanuel Todd’s book “Apres l’Empire” and what you think of his hypotheses? \*\* Never heard of it. ---
**Author:** ![OliverH](https://avatars.discourse-cdn.com/v4/letter/o/278dde/32.png) [@OliverH](https://boards.straightdope.com/u/OliverH)\ **Post date:** [May 6, 2003, 10:45am UTC](https://boards.straightdope.com/t/does-bush-attack-the-world-because-the-status-of-the-us-is-threatened/171872/49 "2003-05-06T10:45:44Z")
> [@](#): > > \*Originally posted by Collounsbury \* > \*\*Never heard of it. \*\* It seems while it was translated in several other languages, English is not one of them. One reason might be that he was immediately declared ‘anti-american’ by US pundits. There is a small paragraph on it at [http://www.atimes.com/atimes/Front\_Page/EC21Aa03.html](http://www.atimes.com/atimes/Front_Page/EC21Aa03.html) (scroll down) though it somewhat oversimplifies Todd’s points ---
**Author:** ![system](https://global.discourse-cdn.com/straightdope/original/2X/e/e489c3b7d8fce19c4b355dd4fc3f88cc39c34b87.png) [@system](https://boards.straightdope.com/u/system)\ **Post date:** [May 6, 2003, 10:49am UTC](https://boards.straightdope.com/t/does-bush-attack-the-world-because-the-status-of-the-us-is-threatened/171872/50 "2003-05-06T10:49:34Z")
> [@](#): > > \*Originally posted by OliverH \* > \*\*It seems while it was translated in several other languages, English is not one of them. One reason might be that he was immediately declared ‘anti-american’ by US pundits. > > There is a small paragraph on it at [http://www.atimes.com/atimes/Front\_Page/EC21Aa03.html](http://www.atimes.com/atimes/Front_Page/EC21Aa03.html) (scroll down) though it somewhat oversimplifies Todd’s points \*\* That’s fine, I have no problems with French. Sounds overdrawn but perhaps I shall try to locate it. However the issue re dependance on large capital inflows is correct and not trivial. [Previous page](https://boards.straightdope.com/t/does-bush-attack-the-world-because-the-status-of-the-us-is-threatened/171872.md?page=2)