This is the age of once-in-a-lifetime events.

Just as the last quarter of 2008 witnessed the greatest financial crash in most people’s lives, the Northern-hemisphere Summer of 2009 presented a political happening on a similar order of magnitude to President Nixon’s exit from the White House in 1974.

In metaphoric terms: President Barrack Obama hit the “Lincoln Wall” going ninety miles an hour and on the way to the hospital, a medical emergency worker found the number “666″ on his scalp, under his hair.

The “Lincoln Wall”, of course, was the barrier referred to by Abraham Lincoln, in the saying:

You can fool some of the people all of the time, and all of the people some of the time, but you can not fool all of the people all of the time.

President Obama hit this “wall” when he failed to get a Democrat-controlled Congress to pass a thousand-page “health care reform” bill, without reading it, before adjourning for summer recess and facing their constituents at traditional townhall meetings.

The “medical emergency worker” in this metaphor represents the American people who finally began to figure out that Barrack Obama was not the “Chosen One” after all.

The number “666″ represents the little girl along the parade route as Obama drove to a town meeting in New Hampshire, holding up the hand-written sign: “Obama lies, Grandma dies”.

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The rest of the world holds $16.8 trillion in US financial assets, according to Federal Reserve release Z.1, as of Q1 2009.

	Foreign trade based on dollars

Most of US financial assets held by foreigners are the result of the fact that the United States has been importing more from the rest of the world since 1971 than it has been exporting and that the sellers of foreign goods have been happy to receive US dollars in payment.

US financial assets held by the rest of the world consist mostly of debt instruments denominated in US dollars.

About $5.6 trillion is made up of direct investments and miscellaneous assets like real estate. Another $1.6 trillion is in US traded equities. The balance, about $9.6 trillion, is dollar-denominated debt owed to non-resident holders.

Although this “foreign debt” poses no real threat to US citizens, since it is denominated in US dollars, many people, including economists who should know better, think otherwise.

So, how long would it take to “work off” this debt?

What would happen if foreign exporters suddenly refused payment in dollars?

As long as the rest of the world accepts dollars in payment for exports, while the US continues to import more than it exports, the US trade deficit will continue to grow.

The decline in the value of the US dollar is nothing new. It has been going on for over half of century, since President Roosevelt rescinded convertibility into gold. The decline accelerated with President Nixon’s complete abandonment of the gold standard. Current variations in the value of dollar are hardly a blip in the long term trend. (Of course, other fiat currencies have also been declining in value.)

	The US dollar has declined since FDR abandoned the gold standard

Let’s pretend, however, that foreign exporters suddenly decide that they will no longer accept dollars in payment for their goods and rush to get rid of their holdings of US financial assets.

Here is what would probably happen:

• The value of the dollar against other currencies would plunge.
• US export goods would become incredibly cheap in terms of foreign currency. This would tempt foreign holders of US dollar debt to trade it for cash and buy export goods.
• By dumping dollar bonds to buy export goods, interest rates on US bonds would soar as prices fell. This would tempt some foreign holders not to sell.
• American importers, unable to pay in dollars as in the past, would need to borrow foreign currencies to import essentials like oil. Imports of “non-essentials”, like plastic dolls from China, would drop. Oil prices would rise. Americans would use their cars less.
• Foreigners holding dollar assets would find that the only way to get rid of the now-unwanted dollars would be to use them to buy non-financial assets from Americans (such as real estate and export goods). Dollars are legal tender in the US. There is plenty of US real estate and other non-financial assets to absorb the accumulated trade deficit.
• US exports in Q1 2009 were running at an annual rate of $1.5 trillion. At this rate, it would take a little over six years to “work off” the dollar-denominated financial debt due foreigners by selling them US goods and services. Of course, if the rest of the world was really anxious to get rid of their dollar debt, they could buy US export goods at a faster rate, while rushing to buy US real estate and making direct investments in US businesses (which by now would be humming along quite nicely to supply the booming export market.)
• Faced with soaring prices of oil and the inability to pay in dollars, the US would suddenly forget the “green dream” of wind farms and bio-energy and rush to drill in the Gulf of Mexico, while building nuclear plants in every state.
• As foreigners got rid of US financial assets, a major source of credit card financing would dry up. Americans, by necessity, would become thrifty.
• As a major source of easy credit disappears, corporations would be forced to turn to old-fashioned methods of equity financing. Stock buybacks would be a thing of the past. Stock prices would fall — effected by rising interest rates.
• Foreign exporters, faced with falling demand from the United States that now lacks the currency with which to pay for their products, would have to lay off workers, while employment picks up in the United States in the export sectors. Foreign governments might even seek to boost the dollar.

In other words, if the rest of the world were suddenly to turn against the dollar, the trade deficit might be eliminated in a few years, causing a boom in industrial production and real estate in the US, radical changes in economic behavior, and less employment in former exporters to the US.

What could cause this to happen?

The easiest way to destroy the credibility of the US dollar would be to jack up government spending to the point of bringing on hyper-inflation. In other words: just follow the current policies of the Obama administration.

However, there are countervailing forces that make the above scenario unlikely:

	US Senator Al Franken (D-Minnesota)

• The US is still a representative democracy: Despite the bizarre seating of the not-so-funny comedian Al Franken as a US Senator and the presence of representatives of “safe districts” like Nancy Pelosi and Barney Frank, the public can still be counted to turn away from its leaders, once the “misery index” gets above 15%. Since unemployment is expected to surpass 10% soon, while even modest recovery should send inflation above 5%, the current government is likely to be voted out of office once the public finally understands that Obama promises have been false. Just as in the days of Jimmy Carter, a return to conservative government will restore confidence in the dollar, as steps are taken to curb inflation and reverse Obama policies.
• A cheap dollar will boost American exports: As foreign factories cut back production to meet declining US demand, there will be pressure to accept payment in dollars, as before. After all, many countries have dollar balances, while balances in other currencies are far smaller. Because the value of the dollar has fallen, the value of goods that can be purchased with a dollar will have increased. As foreign unemployment rises, the urge to return to the dollar will also increase. A stronger dollar means not only more sales for foreign factories, but less competition from US exporters.

This “thought experiment” shows that fears of America’s children and grandchildren having to work for years to pay off debt to foreigners are unfounded.

The trade deficit would quickly disappear in an extreme inflationary environment. The system has self-correcting mechanisms.

Illustrations: Wikimedia Commons

On July 2, 2020, Governor Sarah Palin of Alaska, announced that she was resigning from her post. She did not give a clear reason, other than to state that her family was 100% behind the decision. She mentioned the politics of personal destruction, and left it at that.

The liberal press, the home of rabid Palin-haters, sneered, “if you can’t stand the head, get out of the kitchen”, and suggested she was “getting out of Dodge” before an undisclosed scandal broke.

There was talk about her “lack of experience” (ignoring the exceedingly abysmal experience-deficit of the adored Barrack Obama).

There was criticism about her choosing the eve of the Fourth of July to make the announcement, suggesting that she hoped her decision wouldn’t draw much attention over the long holiday weekend.

Criticism of the Fourth of July timing also overlooked the fact that July 4, 2020 was the least patriotic national celebration in years. President Obama spent the day at his daughter’s birthday party. The rest of the nation was absorbed in the details of Michael Jackson’s funeral.

Celebrations of national pride were out of fashion.

Sarah’s reasons

The real reasons for Sarah Palin’s decision to leave office were not disclosed. However, consider the following:

How many honest, decent Americans do you know that have served in high political office for more than one term? If you know any, please put their names in the comments below, so they may be praised and honored.
Most reasonable people, with high standards of personal ethics, will not run for elected office in the United States. The governing consideration is, “If you don’t love the stench, stay out of the sewer.”

Sarah Palin got into politics to help solve problems in the tiny town of Wasilla, Alaska. She did such a good job that she defied all conventional wisdom and became the first woman and youngest governor of Alaska. She had an 80% approval rating in her state by the time John McCain picked here as his running mate in the 2008 Presidential election.

As long as she stayed in Alaska, she could be happy and do good things.

However, on descending to the “lower forty-eight”, she discovered that she was evil incarnate to a huge portion of the American population:

1. She was not a lesbian and did not favor same-sex marriages. Barney Frank, Henry Waxman and the other fifty or so members of the Gay and Lesbian Congressional Caucus had reason to hate her.
2. She did not believe on killing children at birth, when convenient to the mother. Worse still, her daughter, pregnant out of wedlock, did not opt for an abortion — and then, evil of all evils — went about encouraging teenage abstinence. Even worse and totally unforgivable, she insisted on giving birth to a child with Down’s syndrome. No wonder the National Association of Women hated her.

	Professor William Ayers

3. She was a beauty queen, with a large attractive family. She didn’t look at all like the “average American”, who now are generally obese people with multiple tattoos or nose jewelry. Look at the audiences on Dave Letterman’s daily diatribe or the Jerry Springer freak show, or the fans of Oprah Winfrey, or the crowds at Michael Jackson’s funeral — this is what real Americans are supposed to look like. It’s positively unpatriotic to look like Sarah Palin. No wonder so many hate her.
4. She supported her son going to war in Iraq to defend the country. Unlike Nancy Pelosi or Harry Reid, who declared the War in Iraq lost in mid-course, ready to leave the troops to their fate by a hasty retreat, she was a true patriot — not a popular stand with Barrack Obama and his associates from Chicago politics, like “Professor” William Ayers (famous for treading on the American flag and as a home-grown terrorist), or “Reverend” Jeremiah Wright, known for his memorable words, “God Damn America!”

The rational thing to do

Any good mother who loved her family would not expose them to the vile, continuous barrage of invective, invented stories, lies, calumny, and hate-mongering that fell upon the Palin clan.

When David Letterman falsely stated that her young daughter, barely in high school, was having sex with a depraved football player at half-time — a total fabrication, funny only to Obama supporters and Palin-haters (a large portion of the population) — without being fired from his job — it was clear that Sarah Palin would only face much, much worse if she dared to continue to try to do good in politics.

Sarah Palin is a smart woman and has come to realize the depth of the hatred millions of American have for her and her family. It came as a surprise. She was isolated from the “real America” being up there in Alaska.

This is no longer Norman Rockwell country — it is more like a freak show.

And, only the scum of the earth stay in politics for long.

So Sarah Palin did the only thing she could to protect her family. She gave America the finger.

Unfortunately for her, the liberal media are not yet finished. They will not be satisfied with her out of office. She and her family must be destroyed for all they represent.

And Palin-haters have the money, press coverage, and psychotic mind-set to do it.

What does this have to do with the flow of funds?

Well, leadership of a nation is an essential element in economic policy. The stronger that Obama and his supporters get, the more likely his economic policies will endure.

The exit of an honest leader from the scene suggests continued hard times and bad economic policy.