12/05/2004: "As Sound as the Dollar? Let's Hope Not."

The American dollar once was sound. It was strong. Now because of reckless spending and no savings it is losing it's worth. Not to mention the stupidity of going off the gold standard in 1971. It has been on a downward trend ever since that time.

In January 2002 one euro bought 86 cents: this week it was worth almost $1.32. The dollar has lost 35 percent against the euro.

Gold is up to $450 per troy ounce.

In an article in the current issue of The Economist we read this about the falling dollar.

America's growth would be depressed by tax increases or spending cuts, but there would be no need for recession. If, on the other hand, the government fails to cut its budget deficit, the dollar will fall more sharply and bond yields will rise. America's housing bubble might then burst and consumer spending would certainly slow sharply. That combination would reduce the external deficit, but only at the cost of a deep recession.

The Greatest Generation had a Sound Dollar and then along came the Boomers.

Ok. We can't totally blame the Boomers. They didn't take us off the gold standard. They are merely spending all our money and putting us deeply in debt.

Why didn't we stay on the gold standard? And why is the government allowing this to happen? We need to ask these questions and find some answers. Otherwise, we are going to have to pay all of the debt we've racked up. And frankly, we don't have the money for that.