Thursday, February 28, 2008

joseph Stiglitz and Why

The dollar hit a new low this week against the major currencies. A couple of weeks ago Bloomberg reported that the Taj Mahal wouldn’t accept the US dollar anymore and since then, other Indian tourist sites also no longer accept it. This trend is being repeated in other countries.

This may seem trivial, but ever since I was a child, the mighty dollar was the one currency one always had to have in one's pocket if one traveled. It was ubiquitously accepted by porters, hotels, taxi drivers and restaurants all over the world. That time is over as I hear form former colleagues, that in Afghanistan hotels prefer to be paid in Euros.

This country is in the middle of an economical nightmare with repercussions from the sub-prime meltdown sure to remain with us well into next year. Now, as The Australian reports, a leading economist and Nobel Prize Winner, Joseph Stiglitz, has laid the blame for the nation’s financial woes firmly at the feet of the Bush Administration naming the overrun in costs for the Iraq war as the fundamental cause for the pending recession:

"When the Bush administration went to war in Iraq it obviously didn't focus very much on the cost. Larry Lindsey, the chief economic adviser, said the cost was going to be between $US100billion and $US200 billion - and for that slight moment of quasi-honesty he was fired.
"(Then defence secretary Donald) Rumsfeld responded and said 'baloney', and the number the administration came up with was $US50 to $US60 billion. We have calculated that the cost was more like $US3 trillion. "

Stiglitz went on to say that the figure of $US 3 trillion is conservative and probably understated and that another $US 500 billion would be spent on fighting in Iraq in the coming two years, money that could have been better used

to improve the security and quality of life of Americans and the rest of the world.

To put the thing into perspective, Stiglitz mentioned that the money being spent on the Iraq war each week, was enough to wipe out illiteracy in the whole world and just a few days worth of the Iraq war would be enough to fund health insurance for every American child.

The damage Bush has done to the United States is barely fathomable, but it is certainly greater in an economical sense than the worst terrorist dirty bomb scenario one can think of.

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