Discussion in 'Economics' started by areyoukidding?, May 6, 2005.
This guy is such a tool.
Below is a LTE I wrote on that topic. It wasn't printed, but I felt better
Since your appointment as Secretary of the Treasury, you have continually demonstrated a lack of understanding of basic economic concepts or diplomatic ability. The most egregious examples of this ineptitude are listed below. For these reasons, and in the nationâs interest, please resign to allow more competent to assume the Treasuryâs leadership.
When asked by a Bloomberg interviewer if the 1-2 trillion dollars required for social security privitization would increase interest rates, you responded no. The markets would reward the US for effectively dealing with its problems and not demand a higher interest rate. This statement is wrong and demonstrates a basic misunderstanding of supply and demand. When a producer places more goods on the market he lowers the price of the product because it is easier to obtain. Because a bondâs price and yield are inversely related, lowering a bonds price would increase yield. In addition, the total US deficit is approximately 7.8 trillion dollars. Adding 1-2 trillion to this would increase total US debt by 12-25%. An increase of this magnitude increases the possibility of a US credit default. Creditors would demand a higher interest rate as compensation for this possibility. In short, Mr. Secretary, it is impossible for the US to issue this amount of debt without increasing interest rates. Making claims to the contrary indicates a fundamental misunderstanding of basic economic concepts.
In response to the ever increasing US trade deficit, you stated it simply shows the US is a vibrantly growing economy. In effect, the trade deficit was in a fact positive sign for the US economy. I would strongly recommend you read Paul Volckerâs comments on the trade deficit in a Washington Post editorial dated April 10, 2005, where he stated âI don't know of any country that has managed to consume and invest 6 percent more than it produces for long.â The US trade deficit is a clear sign of this imbalance. It is not a sign of economic strength. It is a sign of a country that consumes more then it makes and is unwilling to pay the bill for its excess. Characterizing the trade deficit as a positive for the economy is at best dishonest and at worst blatant disrespect for economic reality.
You have publicly stated the US will lower its fiscal deficit. At the same time, you have publicly supported a budget that does not include the cost of US operations in Iraq and Afghanistan. Considering the size of these operations and the obvious impact they will have on US budget policy, their absence from the budget is appalling. Support for a budget that does not include an expense of this magnitude is fiscally irresponsible.
You have publicly stated support for a strong dollar, yet have also stated the market should determine the dollarâs value. Events over the past two years prove these statements to be diametrically opposed. The dollar has lost 30% since 2003. More importantly, the world economies no longer have a high degree of confidence on the dollar. A poll by the Financial Times of money managers indicated a desire to invest in non-US assets. China, South Korea and Japan have all publicly stated they need to divest away from the dollar. These three Asian countries are also founding members of the Bellagio Group, an âinformalâ group of Asian Central bankers whose purpose is to help its members deal with dollar diversification or the possibility of a dollar crash. If you in fact supported a strong dollar and took the necessary action to fulfill that policy, the preceding events would not have occurred.
In summation, your actions indicate a lack of understanding of international finance. For this reason, I formally request you resign your post immediately so that a more competent member of the financial community can take Treasuryâs helm.
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