The US dollar has been the unofficial global currency since the mid 20th century.  Where are we going now in terms of global currency?  According to Ben Smith at Politico, Timothy Geithner has stated that he is ‘open’ to the idea of a new global currency to replace the dollar.  China has recently expressed this idea which was expressed by Russia a few months ago.  Let’s take a look at where we are and how we got here.

Because of the CRA (see previous articles and video on YouTube “Burning Down The House”), American banks made loans to people who could not pay them back.  Banks who were not willing to make these loans were pressured by groups such as ACORN and accused of being raciests.  I posted a story on March 20 about a local bank that did not make these loans, is doing very well, and was given a negative rating by the federal banking regulators.  Anyway, in order to protect themselves, the banks sold bad loan paper with good loan paper.  Some paper they kept.  That is the root of the mess we are in, and because many of our investments (including the bad paper) were sold overseas, our financial reputation at the moment is horrible.  Unfortunately, we are witnessing the end of America as a world-class economic power.  The debt that we are creating in the budget proposals will bring us into the status of a third-world country. 

I am not optimistic about our future under the current leadership.  This is not totally due to the ‘greed’ of Wall Street.  It is due to the idea that giving everyone a mortgage and a home is a good idea whether they can pay the mortgage or not.  The greed was on the part of the people who bought bigger houses than they could afford because no one ever explained to them that markets sometimes go down.  The greed was also on the part of the people who lied about their income to get mortgages and the people who did not bother the check the numbers.  The greed was also on the part of mortgage brokers (not all of them) who knowingly gave mortgages to people who could not afford them and joyfully collected their commissions.

It will be at least a generation before America regains the respect she has lost in the mortgage melt-down.  Responsible spending and more reasonable tax policies would probably speed up the process a little bit, but at this moment, either seems highly unlikely.