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

Why Isn’t All This Intervention Working?

As usual, the hope is that a cheaper dollar makes exports cheaper and reduces our trade deficit. A nice thought, of course, but past experience shows that this is unlikely.

What’s the real cause of the trade deficit? Chronically high levels of undersaving and underinvestment.

The catch is that everything the Fed is doing right now only encourages two things: undersaving and underinvestment.

When you monkey with interest rates, the way the Fed is wont to do, you’re able to send false signals to potential investors and savers.

In essence, the Fed is telling you that you don’t know what to do with your own money. To them, you’re an individual who’s too stupid to know what’s best. They don’t think you can safely and simply buy the goods and services you need—or want—when and as you need or want them.

To get out of the dot-com hangover, the Fed redirected our attention to housing. By offering us ever-lower interest rates, they encouraged mortgage borrowing on an unprecedented scale. On cue, they allowed two near-bankrupt public agencies—Fannie Mae and Freddie Mac—to huddle under government’s protective wing. These guys are worse than pawnshop brokers, yet they pretend to enable the American dream.

And besides, why would you put aside money to save for a house, when your next-door neighbor is offered a no-money down loan with an adjustable rate in a much better neighborhood than you ever dreamed you could afford?

Banks get way more money off that ...