Miss Bells

When the dollar declines. I’ve asked myself this question many times, what happens when the dollar declines? Do you know? I don’t, well I didn’t but there are actually a lot of different ways to answer this question, all answers require many nuanced factors to be considered.

But perhaps I am getting too excited, I’m jumping from one broad vague idea to the next let me tell you what’s really been on my mind. I will be conducting research this summer at my university and it’s all about the dollars decline, so that’s where the title comes from.

If I’m, being honest I feel out of my depth. Using different indexes such as the dollar currency index and policy changes and comparing across time and this and then that and STOP. Take a breath. There’s too much to cover in one summer, it can never be done. But…little progress is still great to get a little closer to untangle the web that is the US’s economy. The ever so increasing reliant parts that all come together in some way or another. They cannot be untangled. Now I ask the question, can something be changed before it’s too late?

Example, Social Security program. It’s a stable program no? It just recently had it’s 90th birthday after all. It’s been providing retirement salaries to every-day hard working Americans for almost a century long! However the program is in trouble. In seven years (or less) the Social Security fund which is a fancy way of saying all the money the program has will go insolvent. Insolvent is another fancy way to say can’t pay off your debt. Ah, it sounds a lot more dire when you use simple talk doesn’t it? In my business classes this semester I’ve learnt that after a company reaches insolvency they have only two options to either restructure to survive or to liquidate and close down.

So fast forward seven years, it’s 2032, my ten year old sister is just starting her senior year of high school. Let’s check back in on social security, okay it’s a fact that when social security goes insolvent that benefits are going to get cut by 20-24% so that’s no surprise. They’ve gone with option a; restructure to survive. This isn’t very surprising, when have you ever known the government to admit failure? To be fair S.S. would still work… kind of. Now instead of borrowing the difference of 20% every year only taxpayer dollars would be used. Social security would still be fighting an uphill battle but at least now it wouldn’t be taking new debt to cover 20% of it’s operations.

As you can imagine in DC they are still just trying to kick the can down the road. There are currently talks among legislators to take action to avoid “significant losses” for beneficiaries. I would ask those legislators what action they can take at this point? Just take on more debt? That’s an awful idea! It’s already borrowed more than it can afford to pay off, what would be the collateral what would they use to pay interest to the banks? Newly printed dollars some super-high interest predatory bank loan? Let me tell you a secret, one that would ruin the career of a many a politician, there is no action to make it better. No action that is ideal. The government is working on borrowed time and in the process the dollar’s value is being used to help buy said time.

The question I’ll be pondering on is this; when did the fed allow itself to become wall street’s bitch? Jay Powell and Betsy Duke weren’t okay with the large expansion of Quantitative easing but they were there when it started. “the three amigos” Hey that’d make a good comic, thanks Bernanke. This is definitely a topic for another time, and I’ll check back in with you soon dollar. Maybe I’ll make this a regular thing.