That's me in the spotlight
Losing my religion
Trying to keep up with you"
Are we losing our "religion"? What is religion? Faith, a belief. Here in the United States, and most of the world, our religion is our faith in the almighty dollar. How else can we measure our worth? A movie is judged by the size of its weekend box office take, a book by the size of the authors advance, a musician by the number of albums sold, an athlete by the size of his contract, a CEO by the size of his bonus. Even our religions believe that the dollar is our religion. (The pastor of the country's largest church, Joel Osteen of Lakewood Church, declares outright: "God wants to increase you financially.")
Our worship of the "almighty dollar" is centuries old, "as sound as a dollar" was once a proverbial quote. But lately our faith is being weakened. How will we know our worth if we don't know the worth of a dollar? In 1971, after Nixon ended the gold standard, Milton Friedman wrote, "Money has become a fiction that veils fictionality."
Earlier this year it was entertaining to watch libertarian Presidential candidate Ron Paul, who is also chairman of the House subcommittee on monetary policy, question Fed Chairman Ben Bernanke on the dollar. Paul asked, "What is your definition of the dollar?" Bernanke gave the non-answer, "It is the buying power of the dollar...that is what is important." Again Paul asked, "Do you think gold is money?" To which Bernanke replied, "No. It's a precious metal."
If the US dollar is our religion, then Ben Bernanke is its high priest. Bernanke believes that he can create dollars out of thin air; which he can, since they are not backed by anything other than the dollar disciples faith. This week we saw our chief alchemist conjure up enough dollars to prop up Europe's banks for a while (we don't know the amount because it is "open-ended"). At least one major European bank was on the brink of insolvency. It seems that money market funds were no longer willing to buy european bank paper at a "reasonable" price, liquidity was drying up...fast. The Fed and other major central banks agreed to open up dollar liquidity swap lines and foreign currency liquidity swap lines. While other countries signed on to print their currencies too, the "almighty dollar" will be the primary currency used. This is our church after all.
While all risk assets soared (remember the dollar bible passage, "When the Fed floods the market with dollars, all risk assets ascend"), none of Europe's (or the US's) fundamental problems were solved, or even addressed. The Fed bought the banks more time (yes, another bank bailout), but the real issues (the global debt deflation) grind on.
"Oh no I've said too much, I haven't said enough"
The almighty dollar is supposed to comfort us with its certainty, but when the high priest can print trillions at any time, how can we be certain about anything? This religion of ours is fraying at the seams. Why aren't the "Occupy Wall Streeters" occupying the Fed? The Fed does more to ratchet up the wealth-gap than any other organization in the world. Each and every new dollar printed is worth a tiny bit less than the previous dollar. That means that every day the Bernanke is at the printing presses propping up banks, the dollars we use for things like food and gas buy a little bit less. Every day interest rates are kept at zero, savers see their wealth transferred to borrowers. The wealth gap grows.
Losing our faith in the dollar will be painful, but it can also be liberating. The invention of coins and paper currency was originally done to make it easy to trade goods and services. God didn't love you because of the size of your bank account, personal worth meant something other than currency. There's more to life than a little money, isn't there?
"I thought I heard you laughing"