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In times of great economic uncertainty there is a flight to U.S. Treasuries. The full faith a credit of the United States still has some cachet among global investors. Given the credit contagion rolling across the globe, many feel it is safer to park the wealth they just extracted from their own stock markets in U.S. Treasuries while these things get sorted out, even if returns after inflation are negative (at least their principal is comparatively safe). The catch is, to buy Treasuries, you first have to sell your Euros and Pounds for Dollars, bidding up the price of the dollar and temporarily reversing the long downward trend that existed prior to the crisis. So at this moment the dollar is strengthening. Not because of any fundamental strength in the U.S. economy, but because of a fear in the weakness of their own. Because their currencies do not serve as the world's de facto reserve currency. Because their currencies aren't bolstered by the fact that most of the world's oil is sold in dollars (these last few things establishing a floor under the dollar despite the whir of the printing presses). They know the U.S. government will default on its own citizens (those special Treasury Bonds held by the Social Security Trust Fund) before they'd default on the global investing class. To the global investing class, their principal is relatively safe when invested in Treasuries.
But after the crisis passes, their will be a day of reckoning. There will be calls for IMF-like social austerity programs, shifting of funds from the quality of life of U.S. citizens to pay back the $2.5T in inflated money supply, the $5T borrowed by GWB to pay for tax cuts for the wealthy and illegal invasions of harmless countries. There will be hell to pay. It is step 2 toward the Argentinization of the American economy. We will have a small and powerful economic elite, the lords and barons of a new neo-feudalism, a fairly well off thin sliver of managers and magistrates that serve this economic royalty, then everyone else, the pauperized plenty living paycheck to paycheck (when so lucky as to have a paycheck).
We've entered a new world, a Great Unwinding, and as our government has devolved into a tool to saddle vast costs on the swindled public while funneling the benefits to the well-positioned, well-connected few, guess who gets to bare the pain of this Unwinding? It certainly won't be the Bushies nor McIdiot and his fabulously wealthy second wife.
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