ONE OF THE REASONS THAT GOLD IS GREAT

[whats4supper]

http://www.latimes.com/business/la-fi-doll...=la-home-center

The shrinking dollar

It's hit a new low against the euro, and importers and travelers are feeling the effects. Blame is laid on binge borrowing.

By Tom Petruno, Los Angeles Times Staff Writer

5:16 PM PDT, September 15, 2007

On his way to Italy this week, John Blount was dreading the message he'd have to give the artisans who make the pasta and tomato sauce his San Francisco company imports to the U.S.

With the dollar hitting yet another record low against the euro in recent days, Blount faces the prospect of paying more than ever for the linguine, bucatini and other goods he buys in Italy.

He could raise prices for his American customers, but at the risk of losing their business. So the entrepreneur will once again lean on his small-town Italian suppliers to give him a break.

"I'm constantly telling the producers, 'It's getting harder to sell -- you have to lower your prices,' " Blount said.

Once the "almighty dollar," the U.S. currency is flirting with a new nickname: the American peso.

Since 2001 the dollar has lost more than half its value against the euro. It now costs nearly $1.40 to buy one euro. But the decline against its major rivals is just the most visible sign of the buck's loss of purchasing power.

In much of the world -- from Brazil to Poland to Thailand -- one dollar buys less than it did a year ago, and far less than it did four years ago. On Friday, the U.S. currency hit a 30-year low against its Canadian peer.

The trend of a falling dollar isn't news to Wall Street or to the ranks of economists. But it was a shock to Katie Ochoa, 20, when she visited a friend in the Provence region of France in May.

Traveling on a budget, Ochoa said she wasn't prepared to find that a piece of pizza and a Coke would cost the equivalent of $8.

"We're supposed to be such a world power," said Ochoa, a student at the University of Redlands. "But our dollar isn't worth anything."

There's rarely a single explanation for why currencies rise and fall, but many experts believe that the sliding dollar is largely a function of the nation's borrowing binge of the last two decades. That has left the U.S. with a yawning trade deficit, and deep in debt to foreigners.

In theory, a currency is supposed to reflect the underlying health of the economy that stands behind it.

"The basic thing is, we have been living beyond our means," said Ted Truman, a senior fellow at the Peterson Institute for International Economics in Washington.

A dwindling dollar is, in effect, the marketplace's attempt to slow those trends, Truman said -- an effort to get Americans to buy less Italian rigatoni, for example, and more of the domestically produced stuff.

The flip side of a weak dollar is that it makes U.S. goods less expensive for foreign buyers, boosting the fortunes of American exporters such as Frank Robinson.

His Torrance company, Robinson Helicopter Co., turns out 800 commercial helicopters a year. And about two-thirds go to foreign buyers.

"We love to see the dollar get as low as possible," Robinson said. That would make the $400,000 price tag of his R44 Raven II copter cheaper for foreign customers.

With the dollar's slump this decade, business has been so good for Robinson that his workforce has more than doubled since 2000, to about 1,200 people now. "We've been selling all we can produce," he said.

The dollar's slide in recent years "has helped U.S. manufacturing tremendously," said Patricia Mears, director of international commercial affairs for the National Assn. of Manufacturers.

"When I talk to our members, many say, 'I'm much more competitive now than a few years ago,' " she said.

The nation shipped a record $137.7 billion worth of goods and services abroad in July, 15% more than in July 2006, government data show.

Even so, Americans' purchases of imports -- including foreign oil -- still far outstrip what U.S. companies export. Imports reached $196.9 billion in July, up 5% from a year earlier.

The gap between imports and exports is the trade deficit. The broadest measure of the U.S. trade picture is the so-called current account, which includes investment flows. The deficit in the current account reached a record $811 billion last year, more than twice what it was as recently as 2001.

This year the deficit has been shrinking modestly, helped by the surge in exports. But the gap remains massive -- another reason, many economists say, that the dollar is likely to keep falling in value.

Officially, the Bush administration, like its predecessors, has said it favors a "strong" U.S. currency. But Treasury Secretary Henry M. Paulson Jr. also has repeated in recent months that the White House believes currency values should be set by the marketplace.

Among economists, the widespread view is that the dollar will keep declining. Some believe, however, that the trend could speed up.

If the dollar loses value too quickly, it could wreak havoc on the economy and financial markets -- driving up interest rates and inflation and slashing Americans' purchasing power, said Peter Schiff, who heads money management firm Euro Pacific Capital in Darien, Conn.

Schiff sees a crucial test looming for the dollar and the economy: When Federal Reserve policymakers meet Tuesday, they are expected to cut their benchmark short-term interest rate, now 5.25%, to ease concerns that the housing market's woes could drag the rest of the economy into recession.

With the dollar in a renewed sinking spell in recent weeks, the danger is that a Fed rate cut could spark a much faster downward spiral in the currency. That could occur if lower interest rates on dollar-denominated bonds caused foreign investors to balk at buying more, or encouraged them to sell U.S. securities and invest their money elsewhere in the world.

Worse, wholesale flight of foreign money from U.S. bonds could drive up long-term interest rates if the Treasury and other debtors have to pay more to attract investors to their securities.

If the Fed were to cut short-term rates but long-term rates rose, "that would be a really unpleasant scenario for the housing market," said Brad Setser, head of global research at Roubini Global Economics in New York.

But predictions of a dollar meltdown have been common fare on Wall Street since the late 1980s. They have yet to come true.

In part, that reflects the reality of global finances. Asia and the Middle East are swimming in dollars they take in from their exports. That money has to be invested somewhere, and the U.S. -- still viewed as the world's most stable big democracy -- remains a prime destination.

"The world has excess savings and doesn't know what to do with it," said Marc Chandler, head of foreign currency strategy at investment firm Brown Bros. Harriman in New York.

Foreigners' willingness to finance U.S. consumption also is self-serving: By helping to keep America spending, China and other exporters underwrite a huge market for their own goods.

Schiff, however, contends that that era is coming to an end, because the rise of many developing economies is creating a burgeoning marketplace for goods and services outside the U.S. He sees a dramatic decline in the dollar in the next few years because he believes the U.S. will lose its investment appeal.

Many economists have a more sanguine view. They expect the trend to be more of the same: a gradual weakening of the dollar that will further shrink the trade deficit, as imports become more expensive for Americans and U.S. goods become more competitive abroad.

But Setser agrees that a gradual adjustment will depend on China, Russia, South Korea and other up-and-coming economies staying heavily invested in dollar-denominated debt and other U.S. securities.

The big uncertainty, he said, is whether at some point the risk of financing the U.S. economy "becomes too much even for them."

[email protected]

As for BUSH, he hasn't done anything that any other US president of late hasn't done, or Congress, for that matter. The Federal Reserve Bank, which isn't a US Government entity, but rather a private banking concern, sets our interest rates, and tells Congress and the US Government, how much of a credit limit we have for any upcoming budget year. FRB goals are to hamstring our country, and push us more towards insolvency; at which time, the FRB will take over our assets and erase our sovereignty as an independent nation.

[pike335]

great post, very interesting. dave

http://www.latimes.com/business/la-fi-doll...=la-home-center

The shrinking dollar

It's hit a new low against the euro, and importers and travelers are feeling the effects. Blame is laid on binge borrowing.

By Tom Petruno, Los Angeles Times Staff Writer

5:16 PM PDT, September 15, 2007

On his way to Italy this week, John Blount was dreading the message he'd have to give the artisans who make the pasta and tomato sauce his San Francisco company imports to the U.S.

With the dollar hitting yet another record low against the euro in recent days, Blount faces the prospect of paying more than ever for the linguine, bucatini and other goods he buys in Italy.

He could raise prices for his American customers, but at the risk of losing their business. So the entrepreneur will once again lean on his small-town Italian suppliers to give him a break.

"I'm constantly telling the producers, 'It's getting harder to sell -- you have to lower your prices,' " Blount said.

Once the "almighty dollar," the U.S. currency is flirting with a new nickname: the American peso.

Since 2001 the dollar has lost more than half its value against the euro. It now costs nearly $1.40 to buy one euro. But the decline against its major rivals is just the most visible sign of the buck's loss of purchasing power.

In much of the world -- from Brazil to Poland to Thailand -- one dollar buys less than it did a year ago, and far less than it did four years ago. On Friday, the U.S. currency hit a 30-year low against its Canadian peer.

The trend of a falling dollar isn't news to Wall Street or to the ranks of economists. But it was a shock to Katie Ochoa, 20, when she visited a friend in the Provence region of France in May.

Traveling on a budget, Ochoa said she wasn't prepared to find that a piece of pizza and a Coke would cost the equivalent of $8.

"We're supposed to be such a world power," said Ochoa, a student at the University of Redlands. "But our dollar isn't worth anything."

There's rarely a single explanation for why currencies rise and fall, but many experts believe that the sliding dollar is largely a function of the nation's borrowing binge of the last two decades. That has left the U.S. with a yawning trade deficit, and deep in debt to foreigners.

In theory, a currency is supposed to reflect the underlying health of the economy that stands behind it.

"The basic thing is, we have been living beyond our means," said Ted Truman, a senior fellow at the Peterson Institute for International Economics in Washington.

A dwindling dollar is, in effect, the marketplace's attempt to slow those trends, Truman said -- an effort to get Americans to buy less Italian rigatoni, for example, and more of the domestically produced stuff.

The flip side of a weak dollar is that it makes U.S. goods less expensive for foreign buyers, boosting the fortunes of American exporters such as Frank Robinson.

His Torrance company, Robinson Helicopter Co., turns out 800 commercial helicopters a year. And about two-thirds go to foreign buyers.

"We love to see the dollar get as low as possible," Robinson said. That would make the $400,000 price tag of his R44 Raven II copter cheaper for foreign customers.

With the dollar's slump this decade, business has been so good for Robinson that his workforce has more than doubled since 2000, to about 1,200 people now. "We've been selling all we can produce," he said.

The dollar's slide in recent years "has helped U.S. manufacturing tremendously," said Patricia Mears, director of international commercial affairs for the National Assn. of Manufacturers.

"When I talk to our members, many say, 'I'm much more competitive now than a few years ago,' " she said.

The nation shipped a record $137.7 billion worth of goods and services abroad in July, 15% more than in July 2006, government data show.

Even so, Americans' purchases of imports -- including foreign oil -- still far outstrip what U.S. companies export. Imports reached $196.9 billion in July, up 5% from a year earlier.

The gap between imports and exports is the trade deficit. The broadest measure of the U.S. trade picture is the so-called current account, which includes investment flows. The deficit in the current account reached a record $811 billion last year, more than twice what it was as recently as 2001.

This year the deficit has been shrinking modestly, helped by the surge in exports. But the gap remains massive -- another reason, many economists say, that the dollar is likely to keep falling in value.

Officially, the Bush administration, like its predecessors, has said it favors a "strong" U.S. currency. But Treasury Secretary Henry M. Paulson Jr. also has repeated in recent months that the White House believes currency values should be set by the marketplace.

Among economists, the widespread view is that the dollar will keep declining. Some believe, however, that the trend could speed up.

If the dollar loses value too quickly, it could wreak havoc on the economy and financial markets -- driving up interest rates and inflation and slashing Americans' purchasing power, said Peter Schiff, who heads money management firm Euro Pacific Capital in Darien, Conn.

Schiff sees a crucial test looming for the dollar and the economy: When Federal Reserve policymakers meet Tuesday, they are expected to cut their benchmark short-term interest rate, now 5.25%, to ease concerns that the housing market's woes could drag the rest of the economy into recession.

With the dollar in a renewed sinking spell in recent weeks, the danger is that a Fed rate cut could spark a much faster downward spiral in the currency. That could occur if lower interest rates on dollar-denominated bonds caused foreign investors to balk at buying more, or encouraged them to sell U.S. securities and invest their money elsewhere in the world.

Worse, wholesale flight of foreign money from U.S. bonds could drive up long-term interest rates if the Treasury and other debtors have to pay more to attract investors to their securities.

If the Fed were to cut short-term rates but long-term rates rose, "that would be a really unpleasant scenario for the housing market," said Brad Setser, head of global research at Roubini Global Economics in New York.

But predictions of a dollar meltdown have been common fare on Wall Street since the late 1980s. They have yet to come true.

In part, that reflects the reality of global finances. Asia and the Middle East are swimming in dollars they take in from their exports. That money has to be invested somewhere, and the U.S. -- still viewed as the world's most stable big democracy -- remains a prime destination.

"The world has excess savings and doesn't know what to do with it," said Marc Chandler, head of foreign currency strategy at investment firm Brown Bros. Harriman in New York.

Foreigners' willingness to finance U.S. consumption also is self-serving: By helping to keep America spending, China and other exporters underwrite a huge market for their own goods.

Schiff, however, contends that that era is coming to an end, because the rise of many developing economies is creating a burgeoning marketplace for goods and services outside the U.S. He sees a dramatic decline in the dollar in the next few years because he believes the U.S. will lose its investment appeal.

Many economists have a more sanguine view. They expect the trend to be more of the same: a gradual weakening of the dollar that will further shrink the trade deficit, as imports become more expensive for Americans and U.S. goods become more competitive abroad.

But Setser agrees that a gradual adjustment will depend on China, Russia, South Korea and other up-and-coming economies staying heavily invested in dollar-denominated debt and other U.S. securities.

The big uncertainty, he said, is whether at some point the risk of financing the U.S. economy "becomes too much even for them."

[email protected]

As for BUSH, he hasn't done anything that any other US president of late hasn't done, or Congress, for that matter. The Federal Reserve Bank, which isn't a US Government entity, but rather a private banking concern, sets our interest rates, and tells Congress and the US Government, how much of a credit limit we have for any upcoming budget year. FRB goals are to hamstring our country, and push us more towards insolvency; at which time, the FRB will take over our assets and erase our sovereignty as an independent nation.

[whats4supper]

Yeah. I think it's a real drag myself. Of course, we have all witnessed that other American countries have changed rulers, presidents, dictators, whatever, like us changing our socks. I lived in one just after a revolution, and the old money was being used as toilet paper with the new regime.

In Chile, the daily newspaper indicated how much the new currency was devalued, day to day, on a 30-day cycle, so if anyone wanted to buy something, they could plan accordingly. Most of the savings accounts were like a CD, in that people withdrew their funds about every 6-8 weeks, then re-invested it with a new interest cycle. Another reason for the regular periodic withdrawals, was that if the bank collapsed or there was some sort of run, all one's savings would not be lost by an insolvent banking system.

Like USA, they had pennies, nickels, dimes, quarters, but as time went on, those coins were phased out, and only paper or large denomination coinage remained in use. A lot of people also resorted to buying and selling other country's currency in order to make money on exchange value fluctuations (I did this too, as it was more stable and gave higher returns than bank interest).

I guess it's nearly our turn to go through the process; namely due to worthless paper money without a tangible asset (silver or gold) to back up the currency. This allows the government to print up more and more money to put into circulation, based on a resilient credit limit set by the non-USA banking system known as the Federal Reserve System (no more Federal that Federal Express). Barclay's Bank, a well known British monetary institution, is one of the principals in the whole scheme. Which also brought to us, the whole Income Tax system.

I sort of agree with some of the comments pulled from another site, because it's true that none of the younger generation has a trade to learn, or a factory to work out an apprenticeship that will lead to long term employment, or a pension, which seems to be the target of every corporate raider that wants to fatten the CEO's bonus, and shaft the guy who put 30 years into the company, that's now been absorbed by some other outfit whose only objective is to plunder, peel, and sell off any assets there may be left.

I also think that largely, the Mexicans are not to blame (hold the hate mail please), but rather our own politicians that allow the factory and assembly plants to go beyond the borders into another country, then return the finished products without tariffs or anything that would benefit the people. Nor are the workers in the other country given a decent working wage, benefits, or anything. Just a bunch of people working harder, for less, and starving, which is where we are headed. Perhaps the day of reckoning is being somewhat staved off by the fact that many employers, hiring Mexicans or Latinos from other American countries, are still producing instead of being bankrupt, but the day is coming that the whole outfit called the United States, is going to be an insolvent mess, then taken over by the outside banking system, Tri-Lateralists, Bilderbergers, or whatever other names they use, and the once proud and FREE USA is going to be reduced to the rubble like we see in places when going SOUTH.

It doesn't help matters that the Green Party, also termed Obstructionists, wants to shut off the one thing that could keep everything going, and that's the mining part; which, for the most part, the tenacious Canadians are the only ones that will put up with years of BS, to actually jump the hurdles and go into production.

Yep, sad indeed. I couldn't even take my kid out into a tract and teach him to hang board, or pass along the other construction skills I know, so he could make a living, because the living wage we all once worked for is a thing of the past, and now it's more cut throat than ever, and quite frankly, no one on the lower end of things is doing more than passing time at piecemeal wages. Only the corporate bunch is getting a cut, and only that because they do it by ripping off the ones that actually do the work.

Sorry for the essay. The writing's on the wall and it doesn't look good for all of us regular stiffs...

[gotgold]

whats4supper, great posting......

There's also another side of the private banking Federal Reserve System that also stands out to me and is briefly mentioned regarding the backing of our paper dollar with gold reserves.

This other side is, our own "coinage" as produced by the Federal Reserve Mints today! First I must say I'm well aware how fluctuating metal pricing and speculation created havoc years back. I heard the "ex" president (Greenspan) of the FRB make comment recently that "we are in the business to make money/profit".

Now to my obsevation as to coinage......

In the past 6+ years there have been two One Dollar "gold" coins minted by the Fed, the first being the "Sachawea" and the second being the 50 state "President" issue beginning with George Washington.

I use this quoted "gold" coin very lightly......in the 'metal make-up' of these coins there isn't one speck of Gold involved. The base metal of these coins is copper, clad with an alloy (both sides) of manganese/zinc.

The value of these "gold coins" is 'One Dollar' in Purchasing Power according to the FRB, yet the cost in metal value and production is less than 25 cents to the Fed.....so I must ask, who is scratching who's back? The value in these so called 'One Dollar' coins is 25 cents at best, yet they are being touted to the public as the best thing since sliced bread!.....this coinage is IMHO worthless and contains 'nothing' of value (25 cents at best) to the American people.

I look at this as a very "slick form of money laundering and manipulation" by the FRB system and in turn the devaluation of our own currencys.

Years back (my young-pup years) I saw a movie starring "Steve McQueen", called "Rollerball".....thats been thirty some years ago, but the message of that movie left an imprint on how I view what's going on around us today.....?!!

Gary

[JW.]

Just think though, in 1960 three silver dimes was a gallon of gas, today those three dimes gets you a gallon of gas.

Roughly the equivalent of 30 clad dimes today...

Feds stopped the sale of actual gold Eagles to curb the drastic upsurge in the spot gold price...

Somehow i'm beginning to think bad credit (no possible consideration for debt based slavery/credit cards) is actually a blessing...

I find my bling in the ground!

[whats4supper]

curious thing about the Federal Reserve System. All paper money, regardless of the face value, becomes a credit for the printing and paper costs, of about 35 cents per hundred bills.

All coinage, by the FRS's own rules, is credited off the principal at face value or the coins minted, regardless of how much or little it actually cost to make the coin.

All copper coins and copper portions of clad coins (since 1997), is a mix of about 99% zinc, and 1% copper. though it looks like copper, pennies and other zinc based coinage have a tendency to dissolve in soil, the average decomposition taking about 5 years. To many detectorists, this means the detector will pick up the coin if the site has be undisturbed, but they will only find a halo where the coin was (and perhaps a portion of the coin that is unusable or sellable).

A correcton to my previous post is that the Miining Industries, AS WELL AS the manufacturing industries, are the key to stabilizing our economy, though many of them (along with the famous brand names) are no longer of US domain, and the manufacture of which, is completely performed in foreign factories.

When it first started, Walmart, and the likes of other retailers, was a novelty and curiousity, but as we have become dog-eat-dog consumers, looking for the low price, we have inadvertently driven other USA companies out of business in the homeland, those who could not or cannot compete with china (etc.) slave labor. As income, plummeting job futures, and relative worth of USA Citizens and Residents fall ever downward and into the abyss, coupled with inflation of the status quo and currency, these same curiousities in the marketing works have taken their place as an absolute necessity for the consumer hard pressed by lack of steady employment, or sub-union wages and benefits. We now find ourselves the last vestige of holdouts in an approaching Katrina-like consumer showdown (or putdown). Only a few still have a house or property, as the financiers, wholly controlled by the FRS and their manipulation of credit and interest rates, will see to it that once proud Americans are reduced to Debt Slavery, and no one will be seeing a window in lending, anytime soon.

Probably soon, to keep track of the masses- where they originated, age, IQ, job or profession, money in the bank or static cash reserves, and all, will be asked to assume the stamp or barcode, such as that mentioned in Revelation, Chapter 13.

For some time, since the UPC barcode came into existence as a means of inventory and pricing controls in the supermarket (The Mormon Church now requires a barcode on a temple recommend document), the barcode has taken over, and like the scripture indicates, not much that is bought or sold is without one. Since the Mid 1990's, there is a massive supercomputer that sits in Brussels, Belgium, that is often referred to as the BEAST. The UPC code itself has a standard framework of bars, one at each end, and one in the middle, which represents the number 6 in each position, separating two sets of other barcode numbers utilized in the actual product scan.

When you buy the gatorade, campbells soup, labatt's beer, or the candy bar, that code is scanned by a laser, and the information uplinks to a satellite and ends up in the Beast, where program manipulation sorts the data and returns portions to marketers, and consumer oriented corporaations that want to know specifics about each individual's purchasing habits. how much they spent, for what, which days, random splurges, bank cards used, anything and everything they can find out.

Palestinians already know about special barcode tattoos, as well as many denizens of other countries, such as Thailand, where such is scanned everyday when they come to work, cross a border, and more. Probably to keep us categorized from the illegals, or criminals, our day is probably just around the corner. All it's going to take is some serious catastrophe, maybe worthless money, or something grave, and the government is going to offer all a simple solution on the form of a tattoo or some other scannable means.

There are those that think the world is coming to the end (2nd coming perhaps) in 2012, though many religious scholars place it closer to the year of 2060. I would think the latter is probably closer to reality, as the scriptures also talk of all the animals dying off, and incredible heat being the norm. Some prophecies warn of scarce water, and a dead ocean, while others mention strong divisions of thought among groups in society- along the lines of those who accept the tattoo or not, and those who seek refuge and liberty from the strife that will take place.

Who knows what awaits? Some of us already have the tickets in our hands to be a witness.....

[Bandana Don]

Morning ALL: Thanks for the primer on Economics and the Federal Reserve. How many Americans know and understand just what the Federal Reserve is all about? Dang few is my reply.

The mentioning of the bar code tattoo could be a very significant tool for dealing with illegal immigration... tattoo em with a bar code before giving em a free ride back to the border. What would this do for our illegal "catch and release" Border Patrol efforts? Hmm, just think of the business opportunities in Mexican border cities for removal of tattoos.

Don

[whats4supper]

unfortunately, to keep things straight, we'd all have one (tattoo), then we'd be sorted and categorized like so many stock on the hoof.

to add another line, apparently there is some movement to consolidate three soverign countries into one, and change the dollar to the Amero. DECIDE for yourself if there is any merit.

Check out the story in yesterday's LA Times:

Going protectionist over a fantasy highway

Xenophobes see a threat to U.S. sovereignty in a Texas freeway project that would ease trade with Mexico.

By Shikha Dalmia and Leonard Gilroy

September 20, 2007

The U.S. is known for its "paranoid style" of politics, so brace yourself for the next Big Scare coming down the pike (literally) -- the Trans-Texas Corridor. Isolationist conservatives, emboldened by their jihad last year against the Dubai Ports World deal, have identified this road project as the spearhead of a conspiracy to dissolve the United States of America.

The corridor is a proposed two-phase project meant to ensure that the Lone Star State has the transportation infrastructure necessary to handle the growing international commerce coming across the border. The 1994 North American Free Trade Agreement has doubled U.S.-Mexico trade, three-fourths of which flows through Texas. And the movement of goods through the state is expected to increase exponentially in the near future as Asia routes more exports through the newly expanded Panama Canal.

Texas awarded a planning contract in 2005 for the first phase of the corridor to Cintra, a Spanish multinational company, and its San Antonio partner, Zachry Construction. (Cintra also won a $1.3-billion contract last year to build a 40-mile extension of Highway 130, a state toll road connecting Austin to San Antonio that was conceived separately from the corridor, although conspiracy activists claim otherwise.) The first 600-mile section, planned to include such features as tollways, freight-rail and truck-only lanes, will run parallel to the cramped, north-south Interstate 35 from the border town of Laredo to Oklahoma. Construction contracts for that portion haven't been awarded.

The second phase of the corridor, whose planning contract has yet to be handed out, would build a similar highway from the western edge of the Mexico border to east Texas. This might one day link to a separate, federally initiated eight-state expansion of Interstate 69, which currently runs between Port Huron, Mich., and Indianapolis.

This is all too sinister for Jerome Corsi, the Vietnam War veteran who helped lead the Swift Boat charge against John Kerry. Corsi has knitted disparate strands of each of these separate road projects to help convince fellow xenophobes such as Pat Buchanan, Phyllis Schlafly, Lou Dobbs and the John Birch Society that the corridor is the first leg of a secret federal project called the NAFTA Superhighway, a four-football-field wide monstrosity that would run from Mexico's Yucatan to Canada's Yukon.

Never mind that I-69 originated in a 1991 federal transportation law -- pre-dating NAFTA -- and that the planning for the Trans-Texas Corridor has been fully documented on the Web.

Yet even Texas Rep. Ron Paul, a libertarian Republican candidate for president, has fallen for the paranoia. You'd think that Paul would be chanting hosannas to anything that facilitates free trade, but he too fears that the "superhighway" is part of a scheme by foreign companies to erode U.S. borders and create a North American Union combining the United States, Mexico and Canada -- complete with a single government and a common currency called the "amero."

Superhighway opponents regard even routine dialogue between the three neighbors as a treasonous assault on U.S. sovereignty. They are apoplectic about the Security and Prosperity Partnership of North America (SPP), a forum created in 2005 for bureaucrats to discuss such radical topics as how to snag terrorists before they enter the continent and how to speed up cross-border traffic for just-in-time deliveries.

All of this could be dismissed as the paranoid rantings of a protectionist fringe -- except that it is beginning to have a tangible negative effect on public policy.

Montana's Legislature this summer overwhelmingly passed a resolution condemning the superhighway and any union of the three countries, and 18 other states are considering similar legislation. El Cajon Republican Rep. Duncan Hunter successfully amended the 2008 Transportation Appropriations Act to prohibit use of federal funds for any SPP working group. Virginia Republican Rep. Virgil H. Goode Jr. has introduced a House resolution against both the mythical superhighway and the fantasy union.

After the Dubai Ports debacle, in which anti-terrorism hysteria forced Congress to thwart the transfer of U.S. port management leases held by a major British ports operator to a company based in Dubai, the atavistic idea that foreign investment erodes American sovereignty is back into vogue.

Hunter, for instance, has added hoops to the review process that foreign bidders for U.S. companies must go through to prove that they're not a national security threat. This limits the pool of buyers for U.S. companies, thereby lowering their value and the value of 401(k) plans that invest in them. Hunter has also extended the review process to foreign companies vying to build "critical infrastructure." Should his definition include transportation projects, state governments would be deprived of crucial capital and knowledge to modernize their infrastructure.

The paradox of protectionism is that it damages the very thing it seeks to protect. Labor unions, for example, almost killed U.S. auto and steel companies by helping erect barriers against foreign companies, which made domestic products globally noncompetitive. But the impact of today's isolationists threatens to affect the entire economy. If unchallenged, these ideologues of fear will kill the United States' prosperity in the name of protecting its sovereignty.

Shikha Dalmia is a senior analyst and Leonard Gilroy is a senior policy analyst at the Reason Foundation.

http://www.latimes.com/news/printedition/o...la-news-comment