4/16/07

Gresham's Law states that "Bad money drives good money out." This maxim came back to the bunny as he waited out the most recent cold spell in his customary fashion--plopped on the couch for his umpteenth viewing of WATERSHIP DOWN. (Yes, he still chokes when Hazel croaks; no one does death scenes like bunnies. Kudos to that Richard Adams feller.)

The US dollar plungeth; if you don't believe the bunny,try Euronews://newsclip.ap.org/D8OHUDL00@news.ap.org. This is not merely to say that it has lost value against other global currencies--other nations are losing their faith in it. Aside from the enormous ownership of US debt by foreign governments, this is measurable in the spike in commodity prices--most notably gas and oil.

Typical responses of the wizards in Washington to this situation have been either to A) print more money, with the consequent inflation requiring exceedingly high interest rates to correct, or B) a realignment of the currency [read: a further, planned devaulation], such as took place with the 1985 Plaza Accord (the legacy of which, for all you 1980s bunnies, included the purchase of Rockefeller Center by Japanese interests).

The bunny knows that when the green upon which one depends has lost its nutritional value, it's better to hold out for greener pastures. The devaluation of the dollar which continues as of this writing is a primary reason for US capital flight. This, in turn, disrupts global trade patterns. There is no neat and clean way to rectify the problem, but curbing expenditures is at least a partial remedy. A slowed slide in the US dollar can at least buy time until said pattern disruptions present difficulties to trading partners which may (and historically, have) reversed the slide in the dollar's strength. Not until then would the "good money"--investment from other nations with greater currency stability--return, thus making lean pastures green again.

A good thing, from the bunny's point of view.

POSTSCRIPT: the bunny is far too freaked out by Jeffrey Ball's article on renewable diesel (http://online.wsj.com/article/SB117669276713570908-search.html?KEYWORDS=jeffrey+ball&COLLECTION=wsjie/6month)

but his loyal staff has braved its messier implications to conduct further research.