Monday, July 14, 2008

Economics and adventure travel collide. Again.

Have you always dreamed of going to Europe? Then you'd better get on the airplane right-the-hell-now because this is your last chance. This current Administration has unleashed a holy war on the U.S. dollar over the last eight years, and they're determined to finish it off before they leave office. I know speaking in hyperbole turns people off, but I'll say this anyway; Foreign travel is about to be resigned to millionaires. And I mean that.

Here's how it works.
1. The current Administration needs to lower interest rates to try to keep their economy from blowing up.
2. Foreign countries that store their wealth here by buying Treasury bonds will sell them and take their money elsewhere because interest rates are paying too low of a return now.
3. Now everyone's got a bunch of U.S. dollars they don't want and the value of those dollars plummets.
4. You can't afford to go to Europe anymore.

Among the things we buy overseas with dollars is oil, which has gone up in price a lot more for us than it has for Europeans because our dollar keeps weakening. So this will simultaneously double the price of transportation (including plane tickets) and weaken the dollar further (because now we're sending even more money to the middle east to buy expensive oil (Hey! A virtuous cycle in reverse!)) and suddenly it takes 4 dollars to buy one British Pound worth of stuff, and you can't afford to go anymore.

I have a family member currently in Europe, and I'm glad she's going now because this will probably be her only opportunity for a very long time. The U.S. government can now either keep interest rates the same and hope the economy gets better on its own (it won't) or it can lower interest rates, in which case the economy will still plummet and now we have a very weak dollar with sky-high inflation added in. I'm guessing we go for option number two so we can look like we're "doing something." This is the same logic that leads John McCain to try to suspend the gasoline tax. It will do zero to lower prices and make the situation worse, but he can claim that at least he's doing something.

I'm happy I got a lot of my foreign travel in while I could...and you'll notice a common theme with all the traveling I have planned for the next three months...it is all in America. Those national parks that accept the same dollars I earn are looking pretty good. So like I say...get on the plane now if you're going.

How do we fight the collapse of a dollar? We'd have to elect a Democratic lead Congress and President. Here's what would happen:

1. They'd add environmental and labor provisions to NAFTA, which will reduce the trade deficit without adding industry-specific or country-specific trade tariffs.
2. They'd begin pulling troops out of Iraq at roughly two brigades per month and reigning in the foreign spending associated with that.
3. They'd dump $150 billion into fueling green energy R&D, which would make us a first-mover in green tech, which we can sell to the rest of the energy-starved world

All of these things greatly reduces the trade deficit and thus strengthens the dollar. All of this also takes a lot of time. Until all of that happens, a modest trip for two to England for one week will soon cost $10,000.

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