The Little Book of the Shrinking Dollar: What You Can Do to Protect Your Money Now

Chapter Seven

A Tale of Two Deficits

Answers for the United States

As you’re finding out, currencies in trouble are nothing new. We’ve been confronted throughout history with massive currency crises, and we’ve always been able to deal with the fallout. Whether you’re a Goldman Sachs trader in Singapore or a gaucho in Argentina or a garbage man in France, there are plenty of steps to take, but the biggest steps are usually in government’s hands to make.

Our current fearless central banker Bernanke earned the nickname Helicopter Ben for a reason. He said that when times got tough, you could just throw down cash on the strapped populace from a helicopter to aid recovery. While he calls himself a student of the Great Depression, he’s as much a student of the kind of work that created the great stagnation that Japan’s been enduring for years.

It used to be that if you wanted a stellar example of post-war prosperity, Japan was your Time magazine spread. This nation made the best of its post-war peg to the dollar and innovated and exported its way to prosperity.

It had everything: good work ethic, competitive spirit, and a nation of savers. Really there was just one problem: deficit spending. It’s not the way to grow an economy. As we’ll see with Japan, it’s a great way to destroy it.

The Yen Miracle as it was called, lost its luster in 1997. It proves that weak economies have weak currencies and strong economies have strong currencies. But a strong economy may not perhaps a strong currency ...