Sunday, January 30, 2011

Exorbitant Privilege

Exorbitant Privilege


The Decline of the Dollar and the Future of the International Monetary System

By Barry Eichengreen

Book Review


By Richard E. Noble


I chose this book to read because I wanted to know more about paper money and the U.S. dollar in particular. We can learn even by reading books that we disagree with.
This book is well written, easily understandable, informative, and not beyond the scope of any student of history or economics.

I am sure that Mr. Eichengreen feels that he has presented the economic facts of life and that his analysis and conclusions are the only common sense economic alternatives. I disagree and I have no doubt that he will disagree with my criticisms of his philosophy and alternatives. But first I will give credit to the author for writing a very interesting and informative book and state some of the things that the author has taught me or made me better informed about.
I now know what the Exorbitant Privilege is.

The Exorbitant Privilege is a negative description of the advantage given to the Dollar by virtue of its being the currency of international choice. It is an actual monetary advantage that the Dollar enjoys (as high as 6%) because of its history and the fact that it has been the number one choice as a reserve currency of central banking systems throughout the world. This is a condition not necessarily admired or appreciated by other nations competing for economic equality in the world of international finance. Because of this “Exorbitant Privilege” the U.S. is able to operate with a 6% deficit spending and still break even in the international market place.

Secondly, I learned what it means to be a reserve currency. Where nations once horded precious metals, like gold and silver, in reserve to back up their paper money, they now use Dollars. The Dollar is and has been the new financial world’s gold. The Dollar is, at present, gold in 68% of the central banking systems of the world. It was once even higher but in recent years it has been challenged by the Euro. The Euro is now gold in 32% of the central banking systems of the world.
To be the reserve currency to the world gives numerous advantages but harbors many perils. Pointing out these advantages and perils is the major scope of this book as I see it.

Another smaller point of interest to me was the author’s economic insights to the famous Marshall Plan. We always hear the Marshall Plan being touted positively as the greatest act ever of generosity and sound economic thinking. Very rarely is the perilous side of this generosity expounded upon. The biggest point of interest to me is the fact that in order to perform this act of generosity the U.S. had to put its own economic position and the stability of the Dollar in jeopardy.

The author tells us that the money to supply to our European allies did not exist. It had to be printed up and in excess to the gold that backed it at the time. It was extremely inflationary and dangerous but who was to complain? Certainly not the recipients.

In today’s conservative parlance money was manufactured from nowhere. In effect, the post war world was rescued by “fiat money.” By what gold bugs would call worthless pieces of paper.

If the countries in Europe took the dollars given to them and instead of investing them in their own countries and people, chose to speculate and cash them in for gold, they could have bankrupted the U.S. treasury. They could have made themselves or a few of their bankers and super-wealthy, very rich. They didn’t because it was to their advantage not to … at first. They could become richer by using the Dollar to invest in their people and their country’s reconstruction.

By the time we arrived at the post World War II Nixon administration the economic situation had changed. Some of our European beneficiaries now felt that the U.S. had been manipulative and overly demanding with their almighty Dollar. They started turning them in for U.S. treasury gold. It was then that Nixon took America off the gold standard. The U.S. would no longer trade their treasury gold for dollars. Nixon and the legislature who approved this action, in effect, created this paper world that so many conservative thinkers are so hateful of today. The dollar would now “float” in the international market place. It would become a commodity as opposed to a security, I guess one could say. From that point forward all paper money would be valued against all of its competitors in an international marketplace.
The author then continues to present the international Dollar situation, describing alternatives and possibilities that could be on the international economic horizon.
The author uses his trained economic “conventional wisdom” to outline what he thinks must now be done … only giving ground to a lack of political will in doing what he suggests is economic reality and common sense. It is here that he falls back on Thomas Carlyle’s “dismal science” that he has learned to know and love in his college and university training.

His prognosis is to basically downsize the American standard of living, cut the middle class, cut wages, cut government, cut benefits, negatively spin unions and prepare for the flood of superior foreign global competition by advising Americans to put on nose plugs and resign themselves to gulping and swallowing large amounts of economic foreign overflow as they slowly go under until we reach a parody with China, India, Asia and the middle East.

In demanding this balanced budget on the backs of the middle and lower class and an overall downsizing of Middle American life, he dismisses military cuts and imperial aspirations in two very short statements. One statement philosophizing the inevitability of war and the necessity for defense spending and the other referencing a rather dubious figure equating military spending and GDP. In closing that door, he then closes the door on tax increases to the power of the Republicans leaving the only alternative of domestic and social cuts. This is monumental understatement and absurdity. I assume the author is attempting to be glib.

In all fairness the author does not state his prognosis in the exact terms as I have above but this is how I read it, nevertheless. He closes the book by stating that the fate of the Dollar is all in our hands and not the hands of the Chinese. He says this is the good news. But this was all prefaced by the necessity of solving our Dollar problems in accordance with his dismal notions of necessity.

I would like to counter some of his conventional wisdom with some of my radical Americanism.

The author keeps closing open doors and boxing himself and us in his dark economic cave of limited possibilities. The first door he closes is that of the global economy. He accepts it unquestionably. I disagree strongly.

There is no product that we can manufacture here cheaper and more efficiently than it can be manufactured in some foreign country. Therefore to compete on a global, totally free market basis is an outright loser for the U.S. Anyone that says otherwise, in my opinion, is simply pulling your leg. We can’t do it.

Our standard of living is too high. Our values are too high. And rightfully so. We should not throw our hands in the air and give up our values and our standards. We also cannot change the standards and values of our worldly competitors. We must fight, not conform.

We must nationalize our own standards and values and protect them with incentives and legislation as the situation demands. Japan, China, Germany and other countries have been doing this all along. We have got to start competing by designing a level playing field where we make the design and not our competitors and to the advantage of our workers and our national industries. And I emphasize National to the exclusion of international.

When you hear the president or anybody else boasting about the competitiveness and superiority of the American labor force they are blowing smoke up the American workers butt and it is as simple as that. Any worker can sit on a forklift or tractor or press the green or red button. Don’t kid yourselves. This “global” reality must be recognized.

The author then states that we have a negative trade balance that must be corrected. He explains arguments for devaluating the dollar and thus making our exports more attractive to foreign countries. He demonstrates how this is a delusion and does not work.

But there is more than one way to balance our negative trade balance and it has nothing to do devaluating or inflating anything. Our economy is our working people. The Dollar is the tale of the dog, not the dog. Manipulating the tale does not wiggle the dog. It’s the reverse that is required.

We could increase our exports … if we had anything to export. Rather than increasing our exports, we could decrease our imports. No we are not going to tighten our belts, stop buying and start doing without. We could decrease our imports by reclaiming production and manufacturing markets here at home. We all wear shoes. We all wear underwear. These manufacturing outlets and a thousand more can be reestablished here at home via incentives to national companies who have no overseas attachments. Don’t call General Electric, let them call us. The author dismisses this notion by stating that this type manufacturing America should be glad to be rid of. This is foolishness. Eighty-three percent of Americans agree that the U.S. must increase its lost manufacturing capacity.

We can also encourage new domestic manufacturing. But for any new manufacturer to invest here at home, he will have to be granted incentives and some security. China has manufacturers competing for the right to put a plant in their country. We have the largest market in the world. We should be doing the same. No one is going to invest millions here at home in electric cars or wind mill motors only to see their investment go down the drain in a year or two because of cheaper imports from China, Asia, India, or Europe.

The author points out that too much of our national debt is in the hands of foreign governments. We can thank Ronald Reagan who was the first to borrow and spend more than American’s could buy. I suggest we declare a war on foreign debt. Let’s get our government back in the War Bond business. Start a campaign offering bonds to American investors ONLY … common working people as well as big money people, a bond a week at work etc. Pay us a little worth while interest and then use our cash to gradually buy back some of this foreign debt. Most of us regular people will spend and invest our interest right here in our own backyard. It’s a win/win situation. Give Americans the chance to own America once again. We all may be surprised at the results.

I could go on and on but the point is simple. Think nationally. We can actively participate in the global market place but with reservations and to our advantage. Any company currently importing to the United State could be required to establish 20% of their totally manufacturing here in the U. S. or pay a premium. Make trade agreements fair to working Americans not international investors. And the truth is if our government can no longer be trusted to do this for us, Americans are going to have to figure out ways to do it for themselves.

Wednesday, January 19, 2011

What War Taught Me

What War Taught Me about Peace




Robert Muller

Book Review

By Richard E. Noble


I first read this book about 10 or 15 years ago. I have never been able to forget it. I have just finished reading it for a second time for this review.

This is a passionate book written by a passionate and committed man.

Mr. Muller was born and raised in Alsace – Lorraine, a very small but very unique and interesting section of the world. This area has been constantly torn by war and it citizens recruited by varying occupying nations and flags throughout history. Often times in this area, men have served on different sides in the same war – brother or countrymen against countrymen. On occasions some of its countrymen have served on different sides in the same war.

Mr. Muller tells of going into a farm house and seeing a picture of General DeGaulle hanging up on the wall. When he turned the picture over he found a picture of Adolf Hitler on the back side. This was often the plight of the people from Alsace – Lorraine.

Mr. Muller was assistant Secretary–General to a number of different leaders of the United Nations. I feel that he wrote this book as a father talking to a son.

It is a very strong and powerful book. Mr. Muller saw war, killing, torture, execution and death. He wrote this book in honor of the fortieth anniversary of the United Nations and its commitment to bring peace to the world.

Some books I read might have one or two notable quotes. This book has one on nearly every page.

The chapter entitled The Supreme Test is haunting. In it the author describes people whom he witnessed going to their execution. He describes their behavior and his attempt to learn from them how to attain an honorable death for himself.

This book is very frank in its talk of war and inspiring it promotion of peace.
This is a man who devoted his life to the promotion of peace in the world.

This is also somewhat of a spiritual book. I usually turn away from such books. I am not very spiritual or religious but this man gives one of the best defenses from his spiritualism that I have ever read. It is very practical, human, pragmatic and earthly. His explanation of his spiritualism is one that even an atheist could embrace.

This is a very intelligent and experienced man with a message for all the people of the world.

I think this is a great book and I recommend it highly. Someone should pick this up and make it available once again. The man’s message is timeless.

Tuesday, January 11, 2011

Democracy for the Few

Democracy for the Few




By Michael Parenti

Book Review

By Richard E. Noble



On page 295 of Democracy for the Few the author, Michael Parenti, political scientist and historian, states: “More than half a century ago the great sociologist Max Weber wrote: ‘The question is: How are freedom and democracy in the long run at all possible under the domination of highly developed capitalism.’ That question is still with us. And the answer suggested in this book is that freedom and democracy have at best a highly tenuous and marginal existence in capitalist society.

“In a democratic socialist social system the factories, mills, mines, offices, educational institutions, newspapers, hospitals, etc. will not be privately owned for private gain but will be controlled by and for their clients and workers. That is the goal towards which our efforts should be directed ... This commitment is, or should be, towards communal, collective and responsible decision making …”

Okeydokey! Now where have I read that before? I think it was in a book called Das Capital by some obscure writer whose name slips my mind at the moment.

But this does not bother me. The greatest champions for the rights of the working class in American history have come from the American Communist and Socialist Party. This fact has been credited by famous labor leaders from the AFL, CIO and documented by labor historians. It is an historical fact.

But regardless of the author’s conclusions, remedies and recommendations, I think this book is an invaluable read for anyone interested in the problems that face both capitalism and democracy.

This book was published in 1974 and the author’s analyses of the problems of our democratic system are as prevalent in today’s American democratic system as they were back in the 70s. Not much has changed. In fact, any changes that have taken place have only served to enhance Mr. Parenti’s analysis.

This same book could have the publication date 2010 and with a few name changes and an update here and there it would be on time and on the money. It is amazing to me how Mr. Parenti was able to achieve this. Few social critics have mastered this talent. Most political analyses become obsolete after months. Very few hang around for years and only the greatest for decades. The superstars are the ones we are still reading centuries later.

Democracy for the Few is packed with rather shocking facts and comparisons. For example on page 282 we have this interesting juxtaposition of random information: “… by the end of the 1960s upper income Americans were spending 2 billion a year on jewelry – more than was spent on housing for the poor – and no less than $3 billion on pleasure boating – half a billion more than what the fifty states spend on welfare. Over the years greater sums have been budgeted by the government for the development of the Navy’s submarine rescue vehicle than for occupational safety, public libraries and daycare centers combined.

“The total expenses of the entire legislative branch and the judiciary branch and all the regulatory commissions combined constitute a little more than one half of 1 percent of the Pentagon’s budget.”

This book is filled with such information.

As the title, Democracy for the Few, implies, we have a contradiction in terms with regards to our understanding of American democracy says Michael Parenti, college professor and educator. The gap between the democracy that most of us think we have and the democracy that is our national reality is Grand Canyon-like.

In light of the author’s detailed critical analysis can we seriously claim that we have a democracy – even a representative one, or a democratic republic for that matter?

The author points out every scam, every trick, and every deception. He explains why our democracy isn’t a democracy – with footnotes and easily understood facts and figures.

He tells us why our legislature isn’t working; how our executive and judicial branches have failed us; how our free press has turned news into propaganda; how our freedoms and constitutional rights have been undermined; how our legal system and our prisons have been diverted from the cause of true justice to protective institutions for the criminal wealthy; how our military has been twisted from defensive to aggressive – boarding on the fascist … Well, actually he doesn’t explain how the “system” has been diverted; he explains how it was designed that way from the very beginning. He shows us the Forefathers’ intentions and how our government of the rich, for the rich and by the rich has evolved according to plan.

Mr. Parenti does not think that “the system” can be tweaked. He sees our problems as endemic to our capitalist, corporate state. The old solution of switching corporate controlled Democrats for corporate controlled Republicans will not bring viable change nor will it institute true representative democracy.

This does seem to be the case, but Mr. Parenti, as with others who espouse his solution to these “endemic” problems, seems to be of the opinion that only the wealthy, elitist, current ruling class is capable of deceit and corruption. My question to Mr. Parenti would be, Are these problems endemic to capitalism and its ruling class or endemic to human nature. If capitalists, rich and poor alike, could be injected with a strong dose of the good old, Christian Golden Rule – do unto others as you would have them do unto you – could this not be a more apt and suitable solution? I would even support laws being enacted along the Golden Rule line of thinking. The Golden Rule solution may be na├»ve but I find it more acceptable than bombs, bullets and a blood stained revolution in the streets of the U.S.A. Revolutions don’t seem to be working all that well either. Look at what ours has wrought, Mr. Parenti – reed your own book!

Republicans and Democrats alike should read this book. I doubt that either group will benefit from it.

This book by itself could easily serve as the text for a two semester college graduate course in American Democratic Government.

Buy it. Read it and weep.

Saturday, January 01, 2011




A Summer with Charlie


Book Review



By Christine Lewis


Christine Lewis is a journalist, researcher, writer, and photographer. This review by Christine appeared in the Merrimack Valley Magazine July/August edition 2010 along with the first chapter of the novel and a write-up about the author.

If memoirs are the reality TV of the literary world, self-published memoirs are the local cable TV version. The show could be raucously enjoyable, but who’d know to watch it? Such is the experience with a recently discovered gem of a book, A Summer with Charlie by ex-Lawrencian Richard Edward Noble. Published by Noble in 2004, the book tells the story of a young man, Charlie who spends his last days with his boyhood friends at a Salisbury beach summer rental. Charlie has been discharged from the Navy, sent home to die and wishes above all to be “treated normally.” Eight young men do their best to accommodate Charlie during the summer of 1961 and in return receive early lessons on how to live and how to die with grace.

Noble begins the story by providing a humorous background of growing up with the street corner gang in the city of Lawrence. The reader is introduced to the crazy hothouse characters that populate the local YMCA, a hangout more hospitable for the maturing young men. There’s “Harry the Walker” who mysteriously materializes everywhere, bearing a spooky resemblance to an Alfred Hitchcock cameo. Or “Fat George” who shares his encyclopedic knowledge of dirty jokes for hours at a time, never telling the same joke twice. As appealing as these characters may be, the siren song of Salisbury Beach draws the gang to its shores, providing the perfect troika of summer fun: booze, babes and beach.

Charlie reunites with his gang at the Y and asks to be included in the rental when he hears there’s one bed left. The gang says yes but with apprehension: born and raised as Catholics, they want to have their fun and not worry about eternally damning Charlie’s soul due to their debauchery. Charlie spit shines the cottage, the streets and indirectly, the guys with a quiet, unassuming charm. Neighbors begin speaking with the guys, inviting them over for backyard barbecues, even asking them to briefly babysit their kids. Young women are no longer fearful of walking by the cottage or attending parties hosted by the guys. All of this is met with shock on the part of the group, who still like to think of themselves as a wild wolf pack.

While the females are featured indirectly in this story, there’s never any doubt that the women are strong and in control. Niki, the local striptease artist, is clearly capable of holding her own with this crowd. Helen, a young woman who falls in love with Charlie, is artfully fleshed out through her gestures and actions, while the dialog, strictly Lawrencian, belongs to the guys.

The reader is introduced to the inevitability of Charlie’s death in the first chapter, the author surprises instead with how Charlie’s final days lead this group together to manhood. This is a coming of age story that is both tragic and funny and charmingly local.