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- Impacts- Imflation kills dollar primacy/ U.S. leadership
Links- SpendingIncreased government spending will cause inflation—perception-based Harrop 9 [Froma Harrop is a member of The Journal's editorial board and a syndicated columnist, “Deficit Worry is the Greenest Shoot,” June 16 http://www.realclearpolitics.com/articles/2009/06/16/deficit_worry_is_the_greenest_shoot_97005.html] Never mind firmer retail sales, rising stock prices and moderating job losses. The greenest shoot is Americans' changing economic fixation. There's less panic over collapsing banks, home foreclosures and the prospect of another Great Depression. Attention has moved to budget deficits and the resulting federal debt. These are worries of a more stable time, when people had the luxury of looking at the long-term. Suddenly there's talk of hiking taxes and curbing federal spending, which you shouldn't do when the economy is flat on its back. These actions require discipline and sacrifice. They're no fun at all but preferable to a trip to the abyss. Deficits are a disease we can diagnose, and they have a cure we can understand. We know how bad the problem is -- unlike in the dark recent past, when no one could fully assess the threat of the mysterious derivatives, the so-called financial weapons of mass destruction. That said, while budget deficits are a more ordinary concern, today's projected federal imbalances are not ordinary deficits. This year's expected deficit of $1.8 trillion is fueled by the deep recession. The bailouts, economic stimuli, social-safety-net spending and reduced tax revenues are presumably temporary. But the nonpartisan Congressional Budget Office projects a 2019 deficit of $1.2 trillion, even assuming respectable economic growth. And everyone's getting nervous about rising interest rates and how they will bloat the government's borrowing costs. These numbers are huge. They can't continue. But note that new programs, if they're paid for, don't add to deficits. 2NC Inflation Impact—Laundry List Inflation cripples trade, causes poverty, and breeds tyranny Sennholz 9 [Hans F., heads the Department of Economics at Grove City College and is a noted writer and lecturer on monetary and economic principles and practices, April 19, “Your Financial Future - Gold and Silver Bullion,” http://www.rapidtrends.com/the-causes-of-inflation/] It is not money, as is sometimes said, but the depreciation of money — the cruel and crafty destruction of money — that is the root of many evils. For it destroys individual thrift and self-reliance as it gradually erodes personal savings. It benefits debtors at the expense of creditors as it silently transfers wealth and income from the latter to the former. It generates the business cycles, the stop-and-go boom-and-bust movements of business that inflict incalculable harm on millions of people. For money is not only the medium for all economic exchanges, but as such also the lifeblood of the economy. When money suffers depreciations and devaluations it invites government price and wage controls, compulsory distribution through official allocation and rationing, restrictive quotas on imports, rising tariffs and surcharges, prohibition of foreign travel and investment, and many other government restrictions on individual activities. Monetary destruction breeds not only poverty and chaos, but also government tyranny. Few policies are more calculated to destroy the existing basis of a free society than the debauching of its currency. And few tools, if any, are more important to the champion of freedom than a sound monetary system. Impacts- Imflation kills dollar primacy/ U.S. leadershipInflation kills dollar primacy Pritchard 6/2/09 [Pritchard is the senior member of the Rohrer College of Business faculty, “Inflation and Dollar Depreciation,” http://newsblaze.com/story/2009060219390700001.wi/topstory.html] The decreasing value of the dollar has resulted in China calling for another currency to replace the dollar as the major reserve currency. (A reserve currency is a stable currency that is used for a significant portion of international trade.) Although this is unlikely to take place, countries could well decide to replace the dollar with a basket of currencies. Such a move would reduce the demand for the dollar, resulting in its further depreciation. The actual increases in longer-term interest rates result primarily from the fact that bond purchasers - who take a long-term view of the economy - want to obtain a real (inflation-adjusted) return on their investments. Consequently, whenever they expect inflation to increase, they require higher interest rates to compensate them for the anticipated losses in purchasing power that will result from the impending inflation. This fear of inflation drives longer-term interest rates upward. Similarly, anticipated inflation has a negative impact on stock prices. When stock market investors foresee inflation, they too want higher total returns. This results in dampening of stock prices. This dampening is harmful for two primary reasons. First, people spend less when they have less wealth. Lower stock prices (as well as low real estate prices) result in decreased consumer spending and prolong the recession. Higher stock prices stimulate spending and economic growth. Second, at present, many retirees and would-be retirees have seen 40-percent decreases in their 401(k) plans. Many retirees have been forced to return to work; many would-be's have been forced to postpone retirement. This has led to personal hardship for many, contributed to the increased unemployment, will lead to higher long-term unemployment and will postpone economic recovery. Baby Boomers, especially, are frightened about their futures; many are reluctant to spend. Dollar primacy is key to hegemony Looney 3 [Robert, November 2003. Professor of National Security Affairs at the Naval Postgraduate School. “From Petrodollars to Petroeuros: Are the Dollar's Days as an International Reserve Currency Drawing to an End?” Strategic Insights, 2.11, http://www.ccc.nps.navy.mil/si/nov03/middleEast.asp.] Political power and prestige. The benefits of "power and prestige" are nebulous. Nevertheless, the loss of key currency status and the loss of international creditor status have sometimes been associated, along with such non-economic factors as the loss of colonies and military power, in discussions of the historical decline of great powers. Causality may well flow from key currency status to power and prestige and in the opposite direction as well.[8] On a broader scale, Niall Ferguson[9] notes that one pillar of American dominance can be found in the way successive U.S. government sought to take advantage of the dollar's role as a key currency. Quoting several noted authorities, he notes that [the role of the dollar] enabled the United States to be "far less restrained…than all other states by normal fiscal and foreign exchange constraints when it came to funding whatever foreign or strategic policies it decided to implement." As Robert Gilpin notes, quoting Charles de Gaulle, such policies led to a 'hegemony of the dollar" that gave the U.S. "extravagant privileges." In David Calleo's words, the U.S. government had access to a "gold mine of paper" and could therefore collect a subsidy form foreigners in the form of seignorage (the profits that flow to those who mint or print a depreciating currency). The web contains many more radical interactions of the dollar's role. Usually something along the following lines: World trade is now a game in which the U.S. produces dollars and the rest of the world produces things that dollars can buy. The world's interlinked economies no longer trade to capture a comparative advantage; they compete in exports to capture needed dollars to service dollar-denominated foreign debts and to accumulate dollar reserves to sustain the exchange value of their domestic currencies…. This phenomenon is known as dollar hegemony, which is created by the geopolitically constructed peculiarity that critical commodities, most notably oil, are denominated in dollars. Everyone accepts dollars because dollars can buy oil. The recycling of petro-dollars is the price the U.S. has extracted from oil-producing countries for U.S. tolerance of the oil-exporting cartel since 1973.[10] America's coercive power in the world is based as much on the dollar's status as the global reserve currency as on U.S. military muscle. Everyone needs oil, and to pay for it, they must have dollars. To secure dollars, they must sell their goods to the U.S., under terms acceptable to the people who rule America. The dollar is way overpriced, but it's the only world currency. Under the current dollars-only arrangement, U.S. money is in effect backed by the oil reserves of every other nation.[11] While it is tempting to dismiss passages of this sort as uninformed rants, they do contain some elements of truth. There are tangible benefits that accrue to the country whose currency is a reserve currency. The real question is: if this situation is so intolerable and unfair, why hasn't the world ganged up on the United States and changed the system? Why haven't countries like Libya and Iran required something like euros or gold dinars in payment for oil? After all, with the collapse of the Bretton Woods system in 1971 the International Monitary Fund's Standard Drawing Rights (unit of account) was certainly an available alternative to the dollar.[12] Global nuclear war Thayer 06 [Bradley A., Professor of Defense and Strategic Studies @ Missouri State University, “In Defense of Primacy.,” National Interest; Nov/Dec2006 Issue 86, p32-37] THROUGHOUT HISTORY, peace and stability have been great benefits of an era where there was a dominant power--Rome, Britain or the United States today. Scholars and statesmen have long recognized the irenic effect of power on the anarchic world of international politics. Everything we think of when we consider the current international order--free trade, a robust monetary regime, increasing respect for human rights, growing democratization--is directly linked to U.S. power. Retrenchment proponents seem to think that the current system can be maintained without the current amount of U.S. power behind it. In that they are dead wrong and need to be reminded of one of history's most significant lessons: Appalling things happen when international orders collapse. The Dark Ages followed Rome's collapse. Hitler succeeded the order established at Versailles. Without U.S. power, the liberal order created by the United States will end just as assuredly. As country and western great Ral Donner sang: "You don't know what you've got (until you lose it)." Consequently, it is important to note what those good things are. In addition to ensuring the security of the United States and its allies, American primacy within the international system causes many positive outcomes for Washington and the world. The first has been a more peaceful world. During the Cold War, U.S. leadership reduced friction among many states that were historical antagonists, most notably France and West Germany. Today, American primacy helps keep a number of complicated relationships aligned--between Greece and Turkey, Israel and Egypt, South Korea and Japan, India and Pakistan, Indonesia and Australia. This is not to say it fulfills Woodrow Wilson's vision of ending all war. Wars still occur where Washington's interests are not seriously threatened, such as in Darfur, but a Pax Americana does reduce war's likelihood, particularly war's worst form: great power wars. Second, American power gives the United States the ability to spread democracy and other elements of its ideology of liberalism: Doing so is a source of much good for the countries concerned as well as the United States because, as John Owen noted on these pages in the Spring 2006 issue, liberal democracies are more likely to align with the United States and be sympathetic to the American worldview.( n3) So, spreading democracy helps maintain U.S. primacy. In addition, once states are governed democratically, the likelihood of any type of conflict is significantly reduced. This is not because democracies do not have clashing interests. Indeed they do. Rather, it is because they are more open, more transparent and more likely to want to resolve things amicably in concurrence with U.S. leadership. And so, in general, democratic states are good for their citizens as well as for advancing the interests of the United States. 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