Last Call

The Telegraph's Jeremy Warner mourns the death of the dollar.

The challenge for a developing nation such as China is a rather different one. In China, the propensity to export and save is driven by an absence of any meaningful social security net, in combination with the legacy of its oppressive one child policy, which has deprived great swathes of the population of children to fall back on for support in old age.

What's more, most Chinese don't earn enough to buy the products they are producing, so in what has become the customary path for developing nations, they export the surplus and save the proceeds.

Yet even in China the establishment of a newly affluent, free-spending middle class may now have gained an unstoppable momentum. In any case, the country can no longer rely on American consumers to provide jobs and growth. It needs a new growth model, which means ultimately adopting the Henry Ford principle that if you want a sustainable market for your products, you have to pay your workers enough to buy them.

These trends – all of which pre-date the crisis but which, out of necessity, are being greatly accelerated by it – will eventually drive a move away from the dollar as the world's reserve currency of choice. As China takes control of its economic destiny, spends more and saves less, there will be less willingness both to hold dollar assets and to submit to the domestic priorities of US monetary policy.

None of this will happen overnight. Depressed it might be, but US consumption is still substantially bigger than that of all the surplus nations put together. All the same, that the dollar's reign as the world's dominant currency is drawing to a close is no longer in doubt.

And he's right. Sometime within the next decade, the dollar will cease to be the world's reserve currency. America will no longer be running the show, but the BRIC nations: Brazil, Russia, India, and China. Of those four, China's renminbi will end up being the strongest currency. With almost four times our population, China will eventually start outspending us worldwide, it's only a question of when the dollar collapses.

But it will collapse. It will be replaced, either by the renminbi or whatever passes for a UN global currency down the road. Either way, the US will lose its place atop the economic superpower mountain and our standard of living will be dictated not by us, but by other countries.

We may get our turn again. But I doubt it will happen in our lifetimes. China and India especially are just too big for us to compete with, and Russia and Brazil's resources will make them the major suppliers for China and India's workforces.

The economic engine of Earth will no longer be powered by America. It's already happening. The only question is how much of the end game of our decline we'll be able to choose. And with our current economy, the world has seen that depending on the American consumer is no longer a viable economic model. New markets and new consumers are coming. They will decide who lives and dies in the new marketplace, not us.

The hands of the clock are turning, folks. My generation will see our standard of living continue to drop, year after year. The American middle class that our parents were born into and our grandparents worked so hard to create will not be passed on to our children. We're already experiencing the new economic reality.

Get used to it.

Give And Take

On one hand, as BooMan pointed out earlier today, Obama seems to be indicating he's winding down the rhetoric on Afghanistan. On the other hand, the administration is definitely upping the noise on attacking Iran.

Two U.S. administration officials told CNN on Sunday that the United States plans to tell Iran this week it must provide "unfettered access" to the Qom site, the people involved in its construction and the timeline of its construction "within weeks."

The latest dispute comes ahead of planned talks Thursday involving Iran and the United States, Britain, Germany, France, Russia, and China about international concern over Iran's nuclear ambitions.

In interviews broadcast Sunday, top U.S. officials said Iran's newly revealed underground nuclear facility violates international requirements for reporting such operations, reinforcing the perception that Iran is trying to hide a weapons program.

"I think that, certainly, the intelligence people have no doubt that ... this is an illicit nuclear facility, if only ... because the Iranians kept it a secret," Defense Secretary Robert Gates said on CNN's "State of the Union" program.

"If they wanted it for peaceful nuclear purposes, there's no reason to put it so deep underground, no reason to be deceptive about it, keep it a ... secret for a protracted period of time," Gates said in the interview recorded Friday.

In a separate interview on the CBS program "Face the Nation," Secretary of State Hillary Clinton called for the strongest possible sanctions if Iran can't prove a peaceful intent for the newly disclosed facility and its entire nuclear program.

"It would have been disclosed if it were for peaceful purposes," said Clinton, who also was interviewed Friday. She added that Iran must do more than provide assurances at the meeting on Thursday, because past assurances proved false.

"They can open up their entire system to the kind of extensive investigation that the facts call for," Clinton said. Later, she said: "The Iranians keep insisting no, no, that's for peaceful purposes. That's fine. Prove it. Don't assert it. Prove it."

The faces have changed, it's not Colin Powell and Rummy, but William Gates and Hillary. The country is not Iraq, but Iran. The message is 2002 all over again: comply or face sanctions. The "or worse" is implied.

Anyone else believe Obama will soon be pushing for a drawdown in Afghanistan so we can move onto Iran? Remember, if the news on Iran is to be believed, we've known about Iran's second facility for quite some time now. Only now is the heavy push for sanctions starting again. What's different?

Somebody at the top has made a decision. That decision is "Afghanistan on the back burner and Iran is now the priority."

The Big Dog Barks

Former President Bill Clinton went on Meet The Press today and discussed the smaller but more efficient Pretty Hate Machine.

Former President Bill Clinton told NBC's David Gregory on "Meet the Press" that the so-called "vast right-wing conspiracy" still exists and is "as virulent as it was," but has had its impact diminished by the nation's changing demographics.

Gregory asked: “Your wife famously talked about the vast right wing conspiracy targeting you. As you look at this opposition on the right to President Obama, is it still there?”

The former president replied: “Oh, you bet. Sure it is. It's not as strong as it was, because America has changed demographically. But it's as virulent as it was. I mean, they're saying things about him. You know, it's like when they accused me of murder, and all that stuff they did. … But … it's not really good for the Republicans and the country, what's going on now. I mean, they may be hurting President Obama. They can take his numbers down. They can run his opposition up. But, fundamentally, he and his team have a positive agenda for America. Their agenda seems to be wanting him to fail."

Well, at least the Big Dog gets the GOP plan. He lived through it for eight years and an impeachment. Glad to see he's finally speaking up about it. Yes, they most certainly want Obama to fail and are trying to do everything they can to assure that outcome, even if it ends up hurting the country in the long run.

But you know Bill, it would have been nice if you'd spoken up earlier and not used those same tactics against Obama back in the primaries and all, but politics is politics, apparently.

Who Watches The Watchmen?

Yet another stark reminder that bank regulators failed miserably as far back as Clinton's second term to stop the subprime mortgage crisis. The evidence was there. Nothing was done. The banks want to keep it that way.

The hands-off policy, which the Fed reversed earlier this month, created a double standard. Banks and their subprime affiliates made loans under the same laws, but only the banks faced regular federal scrutiny. Under the policy, the Fed did not even investigate consumer complaints against the affiliates.

"In the prime market, where we need supervision less, we have lots of it. In the subprime market, where we badly need supervision, a majority of loans are made with very little supervision," former Fed Governor Edward M. Gramlich, a critic of the hands-off policy, wrote in 2007. "It is like a city with a murder law, but no cops on the beat."

Between 2004 and 2007, bank affiliates made more than 1.1 million subprime loans, around 13 percent of the national total, federal data show. Thousands ended in foreclosure, helping to spark the crisis and leaving borrowers and investors to deal with the consequences.

Congress now is weighing whether the Fed should be fired. The Obama administration has proposed shifting consumer protection duties away from the Fed and other banking regulators and into a new watchdog agency. That proposal, a central plank in the administration's plan to overhaul financial regulation, is opposed by the industry and faces a battle on Capitol Hill.

The Federal Reserve is best known as an economic shepherd, responsible for adjusting interest rates to keep prices steady and unemployment low. But since its creation, the Fed has held a second job as a banking regulator, one of four federal agencies responsible for keeping banks healthy and protecting their customers. Congress also authorized the Fed to write consumer protection rules enforced by all the agencies.

During the boom, however, the Fed left those powers largely unused. It imposed few new constraints on mortgage lending and pulled back from enforcing rules that did exist.

The Fed's performance was undercut by several factors, according to documents and more than two dozen interviews with current and former Fed governors and employees, government officials, industry executives and consumer advocates. It was crippled by the doubts of senior officials about the value of regulation, by a tendency to discount anecdotal evidence of problems and by its affinity for the financial industry.

Fed Chairman Ben S. Bernanke testified before Congress this summer that the Fed has protected consumers with renewed vigor in recent years, writing new rules and responding to problems more quickly. The Fed has avoided a public position on the new agency, but Bernanke has testified that Congress instead could choose to strengthen the Fed's responsibilities.

The problem is Helicopter Ben wants the Fed to have more power, and the Fed has already proven that it can't handle the responsibility. The other problem is Obama wants to create a new agency to handle it, and Congress will make sure that new agency will never have the power necessary to sufficiently regulate banks.

Our choices are currently the Fed, which is acceptable to the banks and the Congress they have paid for as an agency that will continue to look the other way and give out trillions, or a new agency that only will be acceptable once it is neutered to the point where the Fed's regulatory duties are now, otherwise the legislation will never pass the Congress that the banks own, lock, stock, and barrel.

And I doubt Obama is too busy looking for a third way.

Why Can't You Just Get A Job, Kid?

Because there are none. Who do you think got cut first?

The unemployment rate for young Americans has exploded to 52.2 percent -- a post-World War II high, according to the Labor Dept. -- meaning millions of Americans are staring at the likelihood that their lifetime earning potential will be diminished and, combined with the predicted slow economic recovery, their transition into productive members of society could be put on hold for an extended period of time.

And worse, without a clear economic recovery plan aimed at creating entry-level jobs, the odds of many of these young adults -- aged 16 to 24, excluding students -- getting a job and moving out of their parents' houses are long. Young workers have been among the hardest hit during the current recession -- in which a total of 9.5 million jobs have been lost.

"It's an extremely dire situation in the short run," said Heidi Shierholz, an economist with the Washington-based Economic Policy Institute. "This group won't do as well as their parents unless the jobs situation changes."

Al Angrisani, the former assistant Labor Department secretary under President Reagan, doesn't see a turnaround in the jobs picture for entry-level workers and places the blame squarely on the Obama administration and the construction of its stimulus bill.

"There is no assistance provided for the development of job growth through small businesses, which create 70 percent of the jobs in the country," Angrisani said in an interview last week. "All those [unemployed young people] should be getting hired by small businesses."

There are six million small businesses in the country, those that employ less than 100 people, and a jobs stimulus bill should include tax credits to give incentives to those businesses to hire people, the former Labor official said.

"If each of the businesses hired just one person, we would go a long way in growing ourselves back to where we were before the recession," Angrisani noted.

There are many reasons to be mad at Obama, but the stimulus bill and small business tax credits aren't it. It's called "for the same money, I can hire the more mature 30-year old who needs the job rather than the 22-year old living with mom and dad who's barely able to show up to work on time, dude."

Companies don't have to take entry level workers to fill entry level positions anymore. That's not Obama's fault. There are six seekers for every open job position out there.

Job seekers now outnumber openings six to one, the worst ratio since the government began tracking open positions in 2000. According to the Labor Department’s latest numbers, from July, only 2.4 million full-time permanent jobs were open, with 14.5 million people officially unemployed.

And even though the pace of layoffs is slowing, many companies remain anxious about growth prospects in the months ahead, making them reluctant to add to their payrolls.

“There’s too much uncertainty out there,” said Thomas A. Kochan, a labor economist at M.I.T.’s Sloan School of Management. “There’s not going to be an upsurge in job openings for quite a while, not until employers feel confident the economy is really growing.”

The dearth of jobs reflects the caution of many American businesses when no one knows what will emerge to propel the economy. With unemployment at 9.7 percent nationwide, the shortage of paychecks is both a cause and an effect of weak hiring.

Our consumer economy is not consuming. Not as many workers are needed for the companies that do have jobs. It's a death spiral, frankly...and if it wasn't the stimulus, it would be worse.

But all the stimulus did was buy us time to fix the underlying problems, and refusal to fix those is Obama's fault and his problem. And when the stimulus is up next year, we're in a hell of a lot of trouble.

Selling Exit Passes

This morning, BooMan argues that Obama will not got for any sort of Afghanistan surge as in Iraq, and in fact is now engaged in trying to sell a withdrawal (emphasis mine):

It appears that the administration is mainly working with the Washington Post in their effort to prep the country for a scale-down of our effort in Afghanistan. That is not to say that the Post is supportive of a scale-down. If anything, the case is the opposite. But, tonight, the Post has another article by Bob Woodward based on an interview with National Security Adviser Gen. James Jones. They have a front-page article on the source of Taliban funding (something I've been wondering about for years) by Craig Whitlock. They have an editorial advising us to go all-in or all-out by Rajiv Chandrasekaran. And they have a piece by Walter Pincus on the Taliban's successful communications strategy.

Whatever the specific intent of any of these articles, the cumulative effect is to convey a sense of an overwhelmingly daunting and hopeless challenge. And, I believe, that is what Obama wants to convey because his objective now is to gently announce that we are abandoning our nation-building effort in Afghanistan and that we will not be giving General McChrystal another 40,000 troops for a massive counterinsurgency program. This will contradict his campaign rhetoric and even some of his moves from the winter and spring. But talking tough on Afghanistan was always partly a way of compensating for being critical of military efforts in Iraq. He didn't want to look unwilling to fight against terrorists anywhere in the world. But that doesn't mean that he bought into the absurd 'war-on-terrorism' rhetoric of the Bush administration. With the failed elections in Afghanistan removing any semblance of legitimacy for Karzai's government, there is no reason to invest more in his success. That's the exact same mistake we made in Vietnam, and it cost us dearly in every way that counts.

I'm not sure about that. I'm not sure about that at all, especially since on a number of other parts of Bush's Warren Terrah rhetoric, Obama has bought into them completely, namely Bush's wiretapping of Americans and our treatment and continued incarceration of terror suspects without trial. Both of these programs are still going.

Having said that, Obama gets credit for turning over the torture probe to Eric Holder and Congress, and he has made improvements to the rendition and wiretapping system, but he's still fighting for a PATRIOT act renewal that is 99% the same as before.

There are many, many arguments as to why we're going to have to leave Afghanistan and soon, whether we want to or not. Chief among them is our broken economy. Right now, Obama has to be aware that a trillion dollar surge effort will end his domestic agenda altogether, and we just don't have the troop strength. But Obama's actions in the first several months of his term do not give me hope.

I pray BooMan is right and Obama has weighed the options and found staying untenable, as many Americans have. If there's anything in his favor right no for this tough decision, it's that the GOP has proven they will oppose anything Obama does simply for the reason that Obama is doing it, and the American people are sick of them.