$1,264,000,000 each and every eight-hour business day, or around $2.6 million a minute.
That’s the scale of the support operation which has been mounted — largely, but not solely by the Bank of Japan — to keep the crumbling dollar propped up over the past three months.
Yet, despite the huge $115 billion dollars which have piled up in those reserves of dollars parked at the New York branch of the Federal Reserve — which may not, in fact, fully reflect ALL of the intervention undertaken — the Greenback has fallen 6 pct against a basket of its major trading partners — and 8 pct against Sterling — in that time.
Now, if even the likes of the Brazilians are having to do what admittedly Latin American governments have historically done best — corrupt their peoples’ money — in order not to boost the Dollar, nor to arrest its decline, but merely to limit the speed of its descent, can you see why there are widely held fears outside of America that the fall will become what the authorities euphemistically call “disorderly” — as in Sterling’s “disorderly” movement of September 1992?
Within America, of course, it’s a different matter.
The Administration still fatuously talks of maintaining its “Strong Dollar” policy — can you imagine what would happen if they were pursuing a “Weak” one? — and Alan Greenspan and his chums at the Federal Reserve issue reassuring speeches denying that any of this will have any impact upon the wellbeing of ordinary Americans.
Indeed, in the latest act of self-serving economic illiteracy, Senator Charles Schumer, a Democrat from New York, is sponsoring legislation, Dow Jones reported, to impose tariffs of as much as 27.5% on China as — wait for it — a punishment for choosing to accumulate large quantities of the spendthrift American government’s zero-interest rate, irredeemable IOUs — known as US Dollars.
Schumer, therefore, is threatening to take money out of the pockets of US consumers so that he can exact retribution on those Chinese workers who supply them with the goods which go into their shopping baskets but who refrain from asking for their American customers to do any work for them in return.
Schumer is also effectively threatening to start interfering with what remains of the free market if the Chinese do not immediately assist in a further depreciation of his nation’s currency.
No wonder the Bank of Japan has its work cut out for it — images of Dutch boys and Dykes, spring to mind.
Elsewhere, the media reports that Eastman Kodak, “the company that invented popular photography,” has announced plans to cut up to 15,000 jobs as it struggles to remain “relevant” in the age of affordable digital cameras.
The job losses — which represent around one-fifth of the global workforce in a company which has already slimmed its payroll from 86,000 in 1998 to 64,000 at the end of last year will take place over the next three years, are aimed at saving up to $1bn a year by 2007.
Kodak said that though it had been investing in digital technology for some years, it has been caught by surprise by the “breathtaking” speed with which the new generation of cameras has taken hold.
Kodak’s chief executive, Daniel Carp, said the restructuring was necessary to free up cash that could be invested in digital. “Obviously, when you have to lay off as many people as we have, that’s gut-wrenching,” the papers quoted him. “But we know we are doing it for the better good of the whole company.”
Now, this tragic little tale — one which obviously elicits our sympathy for those affected and who, through no fault of their own, must now undergo the trauma of seeking an alternative means of making their livelihoods — carries within it two profound economic lessons which, sadly, are largely lost upon the High and Mighty in our Treasuries and Central Banks.
The first is that, in the free market, there are absolutely no guarantees and that the only honest way to keep wealth is to constantly seek to employ it in a successful process of entrepreneurship — i.e., by using it to respond the best and the fastest to satisfying ever-changing consumer preferences.
This means that, far from exciting Collectivist envy, those whose predecessors acquired wealth through genuine business success are as much to be pitied as vilified, for holding on to a few $1 million’s worth of purchasing power is probably just as hard as making it in the first place, while the failure to do so — as the case of Kodak highlights — certainly seems more shameful — and is always more high-profile — than the inability to acquire the stake originally.
The second lesson is that it should be obvious that no amount of easy credit, no amount of government support, and no readily calculable depreciation of whatever currency it is in which Kodak pays most of its bills is ever going to reverse a shift whereby we, the consuming public, have individually come to the conclusion that digital film is a far more convenient and versatile medium than the old silver iodide variety.
But, if it’s obvious that inflation, deficit spending, trade barriers, and currency devaluation can’t help Kodak justify future outlays on keeping these 15,000 poor souls at work, satisfying yesterday’s demands, why should we think it helps anyone else — whether they are in tech or telecom, manufacturing or mining, retail or restaurants, construction or cargo-handling?
The answer is they can’t.
But that message of dispassionate minimalism is not what most people want to hear, especially not from their elected representatives, who, like the egregious Mr. Schumer, over in the US, have to be seen to be “Doing Something” to justify their cushioned existence and their penchant for interfering with our precious — if not always fully cherished — freedoms.
Sean Corrigan [send him mail] writes from London.