Tuesday, 13 November 2007

Why the US dollar sucks

The Canadian dollar coin is called a loonie, because the bird on the coin is a loon. (Naturally, the $2 coin is called a toonie.) One loonie buys US$ 1.09, the highest in 130 years. The last time it was this high, the South was marching on Washington and Abraham Lincoln decreed that no-one was allowed to buy or sell gold for a little bit. It's not so much that the Canadian economy deserved a 23% hike in 2007, but that Bush's America isn't balancing the budget:
Let's imagine that you take home $50,000 a year. You've been doing all right, getting by, but not saving anything. But then you decide to give your teen a bigger allowance, and Nana more meds, plus you start shooting fireworks at that jerk who owns the gas station across the street. You owe various neighbours $35,000 though it doesn't look like you'll be paying anything back this year. In fact, you've had to borrow $10,000 over the last seven years to pay for the new expenses. But you've been getting pay raises, so it's kind of OK.
About $5,000 came from just one neighbour, who owns the $1 store where you buy a lot of stuff; it's kind of like a store credit. This guy wants to come over and invest in your wife's Amway business, but he has a tough time getting an invitation. He's also got everyone telling him to change it to a $2 store, but he's worried you'll stop buying his stuff.
Ever since one of your kids got hit with a skyrocket, your wife's been pressuring you to stop with the pyrotechnics. Plus all the gas stations in the area have raised their prices because of it, and because the $1 store guy just got an SUV to match your's. She's talking about taking away your credit card and spending your fireworks money on health insurance.
Here are the numbers:
If the US economy (GDP) was $50,000 these figures would scale:
$9500 on defense/offense
In 2001, earned $42,500 with a debt of $24,500 (first Bush term)
In 1981, earned $22,600 with a debt of $7,350 (lowest % debt)
So that's the U.S. story in a nutshell. Of course international trade is more complicated than personal finance (try owing the bank money for 200 years), and national interest is tempered by various responsibilities and political solutions that don't irritate people too badly -- initially, domestically, at least.

No comments: