Common Sense versus the Sophistication of Business and Economics:
The case of the Euro overcoming the U.S. Dollar

   
Nipawin - Thursday, July 18, 2002 - by: Mario deSantis

 

"It is not that humans have become any more greedy than in generations past. It is that the avenues to express greed had grown [in the 90's] so enormously"

Alan Greenspan, Chairman of The Federal Reserve Board, July 16, 2002(1)

 

 

corrupt
word
processor

I have always been leery and perturbed about the sophisticated business gurus telling
us how to think and do. I was working in the late seventies and early eighties 'under' the
Saskatchewan Health-Care Association (today's Saskatchewan Association of Health
Organizations) and realizing that their pension computer system was a corrupt word
processing system rather than a processing pension system.
 
 

too
sophisticated
to
understand

I asked why so much information requested on input forms was not entered (and not
processed) into the pension computer system. I was told that the pension computer
system was too sophisticated for me to understand. Guess what, these same
business gurus further enhanced the sophistication of their computer systems with
the assistance of the big businesses SAP and SAIC and in the process, these same
two businesses contributed to the sapping and sacking of Saskatchewan.(2)

 

 

common
sense

We must remember that what we need is intelligent common sense and not the
artificially, fragmented and sophisticated mind set of business and economic gurus.

 

 

money
movement
replacing
production

Kevin Phillips, author of the book "Wealth and Democracy: A Political History of the
American Rich", writes today in the New York Times
"the United States economy has been transformed
through what I call financialization. The
processes of money movement, securities
management, corporate reorganization,
securitization of assets, derivatives trading
and other forms of financial packaging are
steadily replacing the act of making, growing
and transporting things."(3)
   

real
wealth

What Kevin Phillips says is that our social and economic system has become too
sophisticated and that it suffers from a disconnection of what is really needed as
creation of wealth; in practice, we don't create wealth simply by playing in the stock
market and we don't necessarily create wealth by playing with money either.
   

unduly
escalated
asset
values

Phillips reminds us that economics is basically the act of making, growing and
transporting things; and economics is not the rationality brought into the Free Market
as implied by Alan Greenspan's well noted expression
"But how do we know when irrational exuberance
has unduly escalated asset values, which then
become subject to unexpected and prolonged
contractions as they have in Japan over the past
decade?"(4)
   

they
toy
with
us

Few days ago I wrote an article and I criticized the relentless message of
"our business gurus telling us how to learn to
live with ambiguities while these same gurus
along with their corporate and political friends
would make the tough decisions at the right time
and at the right place and at the right price,
and in a cyclical and inconsistent never ending
fashion."(5)
   

coping

So, the bottom line for ordinary people is to learn how to live with ambiguities while
the gurus and their patrician friends do our thinking for us and dictate their inconsistent
and sophisticated economics.
   

gurus
are
defeated
by the
stock
market

It was while navigating the Internet that I found the best description for our inconsistent
and sophisticated economics science, that is "on the other hand economics." It is
really a laugh listening to the gurus and understand that they speak a lot and mean
nothing. So, as you listen to the business gurus don't feel overpowered by their
sophisticated speeches as their bubbling is no different from the bursting bubbles of
the stock market.
   

trade
deficit
and
foreign
investment

Lately, the Euro currency has overcome the U.S. Dollar and the following are two
examples on how "on the other hand economics" explains this phenomenon:
i)American manufacturers are happy to see a weaker dollar as they can
sell more of their goods abroad,(6)
 
ii)on the other hand, Secretary Treasurer John O'Neill wants a stronger
dollar so that more foreign investments can subsidize the U.S.
economy.(7)
   

USA
comes up
short
$1.1
billion
a day

We don't need a strong or a weaker U.S. dollar. What we need is just intelligent
common sense. Is it right to have a strong U.S. dollar and rape the resources of
other weaker countries while the American economy continues to maintain a chronic
foreign trade deficit and while the American economy requires $1.1 billion of overseas
cash each day to finance its $400 billion deficit?(7)
   

devalue
for the
good of
the World
economy

Non conformist economist Dean Baker expressed his intelligent common sense two
years ago as he suggested that a lowered value of the dollar
 
i)would check the bubbles of the stock market,
 
ii)would reduce the foreign trade deficit, and
 
iii)would in the end
 
provide better growth and stability to our global economy.(8)
   
References:

1.
-
-

Testimony of Chairman Alan Greenspan Federal Reserve Board's semiannual monetary policy report to the Congress Before the Committee on Banking, Housing, and Urban Affairs, U.S. Senate, July 16, 2002 http://www.federalreserve.gov/boarddocs/hh/2002/July/testimony.htm
   

2.
-

Fraudulent SGI and the Sapping, Sacking and Downsizing of Saskatchewan By Mario deSantis, June 25, 2002
   

3.
-

The Cycles of Financial Scandal By Kevin Phillips, July 17, 2002, The New York Times http://www.nytimes.com/2002/07/17/opinion/17PHIL.html
   

4.
-
-
-

The Challenge of Central Banking in a Democratic Society Remarks by Chairman Alan Greenspan At the Annual Dinner and Francis Boyer Lecture of The American Enterprise Institute for Public Policy Research, Washington, D.C. December 5, 1996 http://www.federalreserve.gov/boarddocs/speeches/1996/19961205.htm
   

5.
-

Corruption in Corporate (North) America: the sky is truly falling, trust no one By Mario deSantis, July 12, 2002
   

6.
-

ANALYSIS-Could dollar slide vs euro, yen turn to rout? By Sumeet Desai, July 16, 2002, Reuters News Service http://www.forbes.com/business/newswire/2002/07/16/rtr662715.html
   

7.
-
-

O'Neill backs strong dollar Treasury Secretary says euro has only regained half its original value in latest runup. CNN/Money, July 16, 2002 http://money.cnn.com/2002/07/16/news/economy/oneill.reut/index.htm
   

8.
-
-

Double Bubble: The Implications of the Over-Valuation of the Stock Market and the Dollar by Dean Baker, Center for Economic and Policy Research, June 2000 http://www.cepr.net/columns/baker/double_bubble.htm