Election day is always a little crazy around our house. My wife is a reporter and so her day extends well beyond the typical deadlines. I am involved directly in dozens of cities and so my own "War Room" has multiple computer screens and TV's tracking everything from local to national races. And now the kids are 6 and 3 years old instead of 4 and 1 the last time, so I had to get them involved in the fun too. We had a "Princess Party" to celebrate. Touchingly, my oldest girl was sad to find out that the candidate I had volunteered for - and which she had helped me drop off signs for - did not win. Some good questions and tough lessons for a budding young mind.

Enjoy the week's news:

  • The Federal Reserve this week officially announced their plan to actively devalue the United States currency (a policy known as Quantitative Easing). In the short run, this will push interest rates down so that businesses, individuals and governments can all borrow at low rates. For businesses unsure of the future and individuals saddled with immense levels of debt, the ability to borrow more - even at low rates - is rather meaningless. For the Federal government, which is borrowing heavily, it is quite beneficial. In the short-term, that is. Advocates for printing more money to prop up the Old Economy not only prevent a necessary economic transformation but will hurt most Americans (especially the poor and vulnerable), punish people that have saved prudently and ultimately flirt with disaster.

Most Americans have absolutely no idea how fragile the world financial system is right now. Once the rest of the world loses faith in the U.S. dollar and in U.S. Treasuries this entire thing could completely unravel very quickly.

The Federal Reserve is playing a very dangerous game. They are openly threatening the delicate balance of the world financial system.

  • How will Quantitative Easing - the printing money out of thin air to buy the debt of the Federal government - hurt most Americans, especially the poor and vulnerable? For starters, in an economy that runs on cheap oil, devaluing the dollar is going to make filling up your tank more expensive.

"The Fed announced yesterday evening that it would be buying up more US treasuries. The much weaker US dollar as a result is now giving impetus to commodity prices," said Commerzbank analyst Carsten Fritsch.

A weak greenback makes dollar-priced crude cheaper for buyings using stronger currencies. In turn, that tends to stimulate oil demand and prices.

Crude futures had already surged in New York on Wednesday after the Fed unveiled the plans that have been dubbed QE2 by traders.

"The additional liquidity could also flow into commodity markets and lead to excessive oil prices on a more permanent basis," Fritsch added.

  • Oh, and I believe most people eat food. QE will drive up the prices for commodities like corn and wheat as well as the petroleum products used in fertilizers. Devaluing the currency is about the most regressive way there is of taxing Americans to cover our debts.

For example, consider this: in the year 2000, if current trends continue, the average blue-collar annual wage in this country will be $568,000. Think what this inflated world of the future will mean — most Americans will be millionaires. Everyone will feel like a bigshot. Wouldn't you like to own a $4,000 suit, and smoke a $75 cigar, drive a $600,000 car? I know I would!

But what about people on fixed incomes? They have always been the true victims of inflation. 

  • As a final thought on Quantitative Easing, keep Jim Kunstler's constant admonition that we can't get "something for nothing" in mind as you read Bernanke's words explaining why printing more money is a great approach for the U.S. economy. All gain and no pain.

This approach eased financial conditions in the past and, so far, looks to be effective again. Stock prices rose and long-term interest rates fell when investors began to anticipate the most recent action. Easier financial conditions will promote economic growth. For example, lower mortgage rates will make housing more affordable and allow more homeowners to refinance. Lower corporate bond rates will encourage investment. And higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending. Increased spending will lead to higher incomes and profits that, in a virtuous circle, will further support economic expansion.

  • MinnPost.com's Jay Weiner has a series running where he looks at the governments of small towns transitioning to the New Economy. His first article focused on the extreme vulnerability of many of these places to cuts in local government aid, which is a key conclusion of our report Minnesota's Vulnerable Cities. The second article looks more closely at government redesign, particularly consolidation of services. There is no question that the future of our small towns and rural areas is going to be much different than its recent past.

Meanwhile, buzzwords such as "redesign" or "live within your means" might not be enough, or even apply, to places where, on a recent night, City Council members debated whether to waive a $500 fee for a homeowner seeking to demolish her property. At issue, among others, was the prospect of losing that sort of chump change, which goes straight to a small city's bottom line. 

  • A few weeks ago I wrote about my experience in dropping off my new kindergartener and how the city and school had gone to such great lengths to accommodate auto traffic, yet the space was absolutely inhospitable to any kids that might walk. With some federal funding, the local school district, cities and county are starting an initiative to examine this problem at each of the local schools. This conversation is a great first step to looking at a deeply systematic problem. I hope the conversation goes beyond the items listed in the paper (engineers building more stuff) and looks at the critical connection to local land use policy.

The federally funded planning study will identify physical improvements such as sidewalks, crosswalks, traffic control and other strategies to improve school routes. The study will also review driver behavior and law enforcement strategies in school areas and will develop educational materials for parents, students and the driving public.

  • It may be of interest to our readers here in our home state of Minnesota that James Kunstler spent half of his podcast this week talking about Minneapolis. He is right, of course, but don't listen if you get defensive easily.
  • Eric Jaffe at The Infrastructurist blogged about the report this week that our water supply systems are basically crumbling before our eyes. What was most interesting to me is the disconnect Jaffe again points out between the size of the problem and our willingness to pay for a solution.

The American Society of Civil Engineers recently gave America’s drinking-water systems a grade of D-minus. Roughly 10 billion gallons of sewage seep into these crumbling pipes each year. The Obama administration has secured $6 billion for improvements, but the Environmental Protection Agency puts the true cost of fixing water infrastructure at roughly$335 billion.

...

While 69 percent of survey respondents agreed that they take their access to clean water for granted, about two-thirds said they would be willing to pay $6.20 more per month to improve their water systems. If applied to all households across the country, such an increase comes to $5.4 billion, ITT notes.

  • In a diversion from our standard fare....Imagine if you lived on the top of a skyscraper and never left the roof. You looked down on the street far below and saw these little things (cars) that moved around, but you had no idea why or how. So you develop a way to control these little things from your perch. You line up two going in opposite directions as fast as possible and then you smash them together. The hope is that the stuff inside will fly all over and, from watching that stuff, you will be able to figure out the answers to your questions. Substitute protons for cars and now you know have a rough sense of what the physicists are doing at the Large Hadron Collider in Geneva. We live in amazing times. I know I should be embarrassed to to pass this video on except you'll note that is has been viewed over 6 million times. That's a lot of geeks.

 

The Strong Towns blog is like reading James Kunstler, only you can share it with your mom. You can leave a comment or join us for more Strong Towns content on Facebook and Twitter. If you are interested in having the Strong Towns message brought to your community, sign up for a Curbside Chat and we'll make plans to get together in a town near you.