By Patrick J. Buchanan
11/04/07 -- -- - The euro, worth 83 cents in the early
George W. Bush years, is at $1.45.
The British pound is back up over $2, the highest level since
the Carter era. The Canadian dollar, which used to be worth 65
cents, is worth more than the U.S. dollar for the first time in
half a century.
Oil is over $90 a barrel. Gold, down to $260 an ounce not so
long ago, has hit $800.
Have gold, silver, oil, the euro, the pound and the Canadian
dollar all suddenly soared in value in just a few years?
Nope. The dollar has plummeted in value, more so in Bush's term
than during any comparable period of U.S. history. Indeed, Bush
is presiding over a worldwide abandonment of the American
Is it all Bush's fault? Nope.
The dollar is plunging because America has been living beyond
her means, borrowing $2 billion a day from foreign nations to
maintain her standard of living and to sustain the American
The prime suspect in the death of the dollar is the massive
trade deficits America has run up, some $5 trillion in total
since the passage of NAFTA and the creation of the World Trade
Organization in 1994.
In 2006, that U.S. trade deficit hit $764 billion. The current
account deficit, which includes the trade deficit, plus the net
outflow of interest, dividends, capital gains and foreign aid,
hit $857 billion, 6.5 percent of GDP. As some of us have been
writing for years, such deficits are unsustainable and must lead
to a decline of the dollar.
A sinking dollar means a poorer nation, and a sinking currency
has historically been the mark of a sinking country. And a
superpower with a sinking currency is a contradiction in terms.
What does this mean for America and Americans?
As nations realize that the dollars they are being paid for
their products cannot buy in the world markets what they once
did, they will demand more dollars for those goods. This will
mean rising prices for the imports on which America has become
more dependent than we have been since before the Civil War.
U.S. tourists traveling to the countries whence their ancestors
came will find that the money they saved up does not go as far
as they thought.
U.S. soldiers stationed overseas will find the cost of rent,
gasoline, food, clothing and dining out takes larger and larger
bites out of their paychecks. The people those U.S. soldiers
defend will be demanding more and more of their money.
U.S. diplomats stationed overseas, students and businessmen are
already facing tougher times.
U.S. foreign aid does not go as far as it did. And there is an
element of comedy in seeing the United States going to Beijing
to borrow dollars, thus putting our children deeper in debt, to
send still more foreign aid to African despots who routinely
vote the Chinese line at the United Nations.
The Chinese, whose currency is tied to the dollar, and Japan
will continue, as long as they can, to keep their currencies low
against the dollar. For the Asians think long term, and their
goals are strategic.
China -- growing at 10 percent a year for two decades and now
growing at close to 12 percent -- is willing to take losses in
the value of the dollars it holds to keep the U.S. technology,
factories and jobs pouring in, as their exports capture
America's markets from U.S. producers.
The Japanese will take some loss in the value of their dollar
hoard to take down Chrysler, Ford and GM, and capture the U.S.
auto market as they captured our TV, camera and computer chip
Asians understand that what is important is not who consumes the
apples, but who owns the orchard.
Other nations that have kept cash reserves in U.S. Treasury
bonds and T-bills are watching the value of these assets sink.
Not fools, they will begin, as many already have, to divest and
diversify, taking in fewer dollars and more euros and yen. As
more nations abandon the dollar, its decline will continue.
The oil-producing and exporting nations, with trade surpluses,
like China, have also begun to take the stash of dollars they
have and stuff them into sovereign wealth funds, and use these
immense and growing funds to buy up real assets in the United
States -- investment banks and American companies.
Nor is there any end in sight to the sinking of the dollar. For,
as foreigners demand more dollars for the oil and goods they
sell us, the trade deficit will not fall. And as the U.S.
government prints more and more dollars to cover the budget
deficits that stretch out -- with the coming retirement of the
baby boomers -- all the way to the horizon, the value of the
dollar will fall. And as Ben Bernanke at the Fed tries to keep
interest rates low, to keep the U.S. economy from sputtering out
in the credit crunch, the value of the dollar will fall.
The chickens of free trade are coming home to roost.
Mr. Buchanan is a nationally syndicated columnist and author
of "The Death of the West," "The Great Betrayal," "A Republic,
Not an Empire" and "Where the Right Went Wrong."
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