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					MDAW 2012                                                                                                                                                                                       Dollar DA
KELSIE/SADAGOPAL

                                                                                           DOLLAR DISAD
1NC SHELL (1/4) ........................................................................................................................................................................................................... 2
1NC SHELL (2/4) ........................................................................................................................................................................................................... 3
1NC SHELL (3/4) ........................................................................................................................................................................................................... 4
1NC SHELL (4/4) ........................................................................................................................................................................................................... 5
UNIQUENESS – DOLLAR HEGEMONY HIGH ................................................................................................................................................................... 6
UNIQUENESS – DOLLAR STRONG ................................................................................................................................................................................. 7
UNIQUENESS – DOLLAR STRONG ................................................................................................................................................................................. 8
LINK – STIMULUS/PUBLIC WORKS................................................................................................................................................................................ 9
LINK – TRANSIT SPENDING......................................................................................................................................................................................... 10
LINK – HIGH SPEED RAIL............................................................................................................................................................................................. 11
LINK – INFRASTRUCTURE BANK ................................................................................................................................................................................. 12
INTERNAL LINK – FAST DECILNE ................................................................................................................................................................................. 13
INTERNAL LINK – FAST DECLINE ................................................................................................................................................................................. 14
INTERNAL LINK – FAST DECLINE ................................................................................................................................................................................. 15
INTERNAL LINK – DEFICIT SPENDING KILLS DOLLAR .................................................................................................................................................... 16
INTERNAL LINK – DEFICIT SPENDING KILLS DOLLAR .................................................................................................................................................... 17
INTERNAL LINK – DEFICIT SPENDING KILLS DOLLAR .................................................................................................................................................... 18
INTERNAL LINK – DEFICIT SPENDING KILLS DOLLAR .................................................................................................................................................... 19
INTERNAL LINK – DEFICIT SPENDING KILLS DOLLAR .................................................................................................................................................... 20
IMPACT INTERNAL – HEGEMONY ............................................................................................................................................................................... 21
IMPACT INTERNAL – HEGEMONY ............................................................................................................................................................................... 22
IMPACT INTERNAL – OIL SHOCKS ............................................................................................................................................................................... 23
2NC – ECONOMY ....................................................................................................................................................................................................... 24
2NC – FOOD PRICES ................................................................................................................................................................................................... 25
IMPACT – FOOD PRICES ............................................................................................................................................................................................. 26
HEG IMPACTS ............................................................................................................................................................................................................ 27
                                                                                                   AFF ANSWERS
AFF ANSWERS – CONFIDENCE LOW............................................................................................................................................................................ 29
AFF ANSWERS – PLAN K DEFICIT REDUCTION ............................................................................................................................................................. 30
AFF ANSWERS – DEFICIT SPENDING GOOD ................................................................................................................................................................. 31
AFF ANSWERS – DEFICIT SPENDING GOOD ................................................................................................................................................................. 32
AFF ANSWERS – ECON SOLVES DOLLAR ..................................................................................................................................................................... 33
AFF ANSWERS – NO DOLLAR COLLAPSE ..................................................................................................................................................................... 34
AFF ANSWERS – NO DOLLAR COLLAPSE ..................................................................................................................................................................... 35
AFF ANSWERS – DIVESTMENT NOW .......................................................................................................................................................................... 36
AFF ANSWERS – DOLLAR HEGEMONY BAD................................................................................................................................................................. 37
AFF ANSWERS – HEG BAD: CHINA .............................................................................................................................................................................. 38
A/T: HEG GOOD ......................................................................................................................................................................................................... 39
A/T: FOOD PRICES ..................................................................................................................................................................................................... 40
A/T: ECONOMIC DECLINE  WAR.............................................................................................................................................................................. 41




                                                                                                                                                                                                    Page 1 of 41
MDAW 2012                                                                                                                                                                  Dollar DA
KELSIE/SADAGOPAL

                                                                           1NC SHELL (1/4)


   A. INVESTMENTS IN THE DOLLAR ARE HIGH NOW. CONTINUED APPRECIATION HINGES ON
      DEFICIT REDUCTION.

Saraiva ’11 [Catarina Saraiva, Nov 21, 2011, “Dollar Status Grows,” Treasury & Risk & TRBreakingNews]

           Options traders are increasingly betting that the dollar will strengthen. They paid 4.4 percentage
           points more for the right to sell the euro against the dollar than to buy it on Nov. 17, the most
           since the common currency's inception in 1999. The so-called three-month 25-delta risk reversal rate has
           widened for all developed-nation currencies versus the dollar and for emerging-markets such as the real and Mexican peso.

           The dollar's rise comes as a Congressional panel of six Democrats and six Republicans, known
           as the supercommittee, has until Nov. 23 to find $1.2 trillion in deficit reduction, or cause that
           much in spending cuts to go into effect beginning in 2013.
           The bipartisan group is expected to announce that it has failed to reach agreement on federal budget savings, a Democratic
           aide said. The aide, who wasn't authorized to discuss internal matters publicly and requested anonymity, said in an e- mail
           yesterday that it was highly unlikely that the talks could be salvaged.

           If Congress removes the automatic deficit cuts, Standard and Poor's may drop the nation's credit
           rating to AA, after reducing it to AA+ following the debt-cutting agreement, the ratings company said in a statement Aug.
           5 when it announced the downgrade.



   B. TRANSPORTATION INFRASTRUCTURE INVESTMENTS EXPLODES DEFICIT SPENDING
   WITHOUT CREATING JOBS.
Goff and Boccia 2-28-12 [Emily & Romina, “Infrastructure Spending would not create jobs, revive economy,”
http://www.heritage.org/research/reports/2012/02/president-obamas-2013-budget-delivers-tax-hikes-more-spending-
more-debt]
           When it comes to infrastructure spending, the President is once again using the term “investment” as a synonym for “spending.” The billions of dollars the President
           wants to “invest” in infrastructure in his FY 2013 budget would do little to spur job creation in America. Neither would his proposal to establish a national infrastructure
                                                                                 spending on the transportation budget, cover $50
           bank aid economic revival. The President’s “job-creating infrastructure investments,” or
           billion to “jumpstart” transportation projects in 2012, and a six-year, $476 billion proposal for surface-transportation projects,
           including high-speed rail. This would amount to a $135 billion increase in spending, which the President
           proposes to pay for with phony war savings. As taxpayers painfully learned during the past few years, stimulus spending
           does manage to rack up deficits and debt, but it does little to grow the economy and create jobs. Ditto
           infrastructure “investing.” After reviewing a series of studies on the relationship between infrastructure spending
           and economic activity, former Heritage Foundation analyst Ronald Utt concluded that any impact of increased
           infrastructure spending on jobs would be modest and delayed. An influential study commissioned by the U.S.
           Department of Transportation suggesting that $1 billion of federal highway spending would produce the equivalent of 47,576 jobs for one year should be viewed with
           caution. As Utt explained: Regardless of how the federal government raised the additional $1 billion, it would shift resources from one part of the economy to
           another, in this case to road building. The only way that $1 billion of new highway spending can create 47,576 new jobs is if the $1 billion appears out of nowhere as
           if it were manna from heaven.[13]




                                                                                                                                                                              Page 2 of 41
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                                                                           1NC SHELL (2/4)

   C. REDUCING IMBALANCES IN THE DEFICIT IS KEY TO SUSTAINING CONFIDENCE. ANY
   DISRUPTION IN CONFIDENCE WILL END THE DOLLARS ROLE AS THE RESERVE CURRENCY.

Rangarajan & Debabrata Patra 3-16-2012 [C Rangara & Micheal Debabrata Patra, Economic & Political Weekly,
“Can the SDR become a Global Reserve Currency? Lexis]

           While the emergence of the euro has resulted in a small decline in the role of the US dollar over
           the past decade, the latter has maintained its dominance. Over time, the ease and security involved with
           investing in US markets has led the rest of the world to take on massive levels of financial exposure to the US. The value of
           foreign residents' investments in US companies, real estate, capital markets, and government debt was nearly half of non-
           US global GDP as of end-2008. Changes in US monetary policy and financial conditions have had a direct wealth impact on
           foreign residents, influencing their expenditures, and posing a difficult dilemma for foreign investors. Individually, foreign
           investors have an incentive to diversify their portfolios as a matter of prudent risk management. Collectively, however,
           foreign investors have a strong incentive to maintain their holdings of dollar assets to avoid the risk of dollar depreciation
           that could undermine their investments.

           Developments since 2008 have challenged the international financial architecture and the pre-eminence of the US dollar. In
           the aftermath of the global financial crisis of 2008-09, confidence in the US economy has been
           shaken by its persisting structural imbalances. The US current account has been negative for the past 20
           years, reaching 5% of GDP before the global crisis before declining to 3.1% in 2010. The budget deficit stands at more than
           9% of GDP and will be difficult to reduce. These deficits are not offset by sufficient levels of domestic saving. On the
           contrary, the savings rate of private households is a mere 4% of GDP. Capital inflows from the rest of the world have
           financed these deficits. Foreign investors account for more than 50% of new subscriptions to US government bonds. This
           makes the US by far the most highly indebted country in the world. Reducing these imbalances will take many
           years and will require a highly cautious political strategy if shocks are to be avoided. Any
           disruption of confidence in the sustainability of the US economy would make it impossible for
           the dollar to play its role as international reserve currency.


   D. LOSS OF DOLLAR HEGEMONY DESTROYS US PRIMACY.

The Atlantic APR 26 2012 [“The End of Pax Americana: How Western Decline Became Inevitable”
http://www.theatlantic.com/international/archive/2012/04/the-end-of-pax-americana-how-western-decline-became-
inevitable/256388/?single_page=true]

                                   two biggest domestic threats to U.S. power are the country's bleak fiscal
           Indeed, looking forward a decade, the
           outlook and deepening doubts about the dollar's future role as the international economy's
           reserve currency.Economists regard a 100 percent debt-to-GDP ratio as a flashing warning light that a country is at risk of defaulting on its financial
           obligations. The nonpartisan Congressional Budget Office (CBO) has warned that the U.S. debt-to-GDP ratio could exceed that level by 2020--and swell to 190
                               CBO recently warned of the possibility of a "sudden credit event" triggered by
           percent by 2035. Worse, the
           foreign investors' loss of confidence in U.S. fiscal probity. In such an event, foreign investors
           could reduce their purchases of Treasury bonds, which would force the United States to borrow
           at higher interest rates. This, in turn, would drive up the national debt even more. America's
           geopolitical preeminence hinges on the dollar's role as reserve currency. If the dollar loses that
           status, U.S. primacy would be literally unaffordable. There are reasons to be concerned about the dollar's fate over the next two
           decades. U.S. political gridlock casts doubt on the nation's ability to address its fiscal woes; China is beginning to internationalize the renminbi, thus laying the
           foundation for it to challenge the dollar in the future; and history suggests that the dominant international currency is that of the nation with the largest economy. (In
           his piece on the global financial structure in this issue, Christopher Whalen offers a contending perspective, acknowledging the dangers posed to the dollar
                                                                                    Leaving aside the fate of the
           as reserve currency but suggesting such a change in the dollar's status is remote in the current global environment.)
           dollar, however, it is clear the United States must address its financial challenge and restore the
           nation's fiscal health in order to reassure foreign lenders that their investments remain sound. This
           will require some combination of budget cuts, entitlement reductions, tax increases and interest-rate hikes. That, in turn, will surely curtail the amount of spending
           available for defense and national security--further eroding America's ability to play its traditional, post-World War II global role   .




                                                                                                                                                                            Page 3 of 41
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                                                           1NC SHELL (3/4)

   E. COLLAPSE OF US HEGEMONY CAUSES GREAT POWER WAR.

Khalilzad 11 — Zalmay Khalilzad, Counselor at the Center for Strategic and International Studies, served as the
United States ambassador to Afghanistan, Iraq, and the United Nations during the presidency of George W. Bush,
served as the director of policy planning at the Defense Department during the Presidency of George H.W. Bush,
holds a Ph.D. from the University of Chicago, 2011 (“The Economy and National Security,” National Review, February
8th, Available Online at http://www.nationalreview.com/articles/print/259024, Accessed 02-08-2011)

           Today, economic and fiscal trends pose the most severe long-term threat to the United States’
           position as global leader. While the United States suffers from fiscal imbalances and low economic growth, the
           economies of rival powers are developing rapidly. The continuation of these two trends could lead to a shift from
           American primacy toward a multi-polar global system, leading in turn to increased geopolitical
           rivalry and even war among the great powers.
           The current recession is the result of a deep financial crisis, not a mere fluctuation in the business cycle. Recovery is likely
           to be protracted. The crisis was preceded by the buildup over two decades of enormous amounts of debt throughout the
           U.S. economy — ultimately totaling almost 350 percent of GDP — and the development of credit-fueled asset bubbles,
           particularly in the housing sector. When the bubbles burst, huge amounts of wealth were destroyed, and unemployment
           rose to over 10 percent. The decline of tax revenues and massive countercyclical spending put the U.S. government on an
           unsustainable fiscal path. Publicly held national debt rose from 38 to over 60 percent of GDP in three years.
           Without faster economic growth and actions to reduce deficits, publicly held national debt is projected
           to reach dangerous proportions. If interest rates were to rise significantly, annual interest payments — which
           already are larger than the defense budget — would crowd out other spending or require substantial tax increases that
           would undercut economic growth. Even worse, if unanticipated events trigger what economists call a “sudden stop” in
           credit markets for U.S. debt, the United States would be unable to roll over its outstanding obligations,
           precipitating a sovereign-debt crisis that would almost certainly compel a radical retrenchment of the United
           States internationally.
           Such scenarios would reshape the international order. It was the economic devastation of Britain and France
           during World War II, as well as the rise of other powers, that led both countries to relinquish their empires. In the late 1960s,
           British leaders concluded that they lacked the economic capacity to maintain a presence “east of Suez.” Soviet economic
           weakness, which crystallized under Gorbachev, contributed to their decisions to withdraw from Afghanistan, abandon
           Communist regimes in Eastern Europe, and allow the Soviet Union to fragment. If the U.S. debt problem goes critical, the
           United States would be compelled to retrench , reducing its military spending and shedding
           international commitments.
           We face this domestic challenge while other major powers are experiencing rapid economic growth. Even though countries
           such as China, India, and Brazil have profound political, social, demographic, and economic problems, their
           economies are growing faster than ours, and this could alter the global distribution of power.
           These trends could in the long term produce a multi-polar world . If U.S. policymakers fail to act
           and other powers continue to grow, it is not a question of whether but when a new international
            order will emerge. The closing of the gap between the United States and its rivals could intensify
            geopolitical competition among major powers , increase incentives for local powers to play
           major powers against one another, and undercut our will to preclude or respond to international
           crises because of the higher risk of escalation.
            The stakes are high. In modern history, the longest period of peace among the great powers has been the era of U.S.
           leadership. By contrast, multi-polar systems have been unstable , with their competitive dynamics resulting in
            frequent crises and major wars among the great powers. Failures of multi-polar international systems
           produced both world wars.
           American retrenchment could have devastating consequences. Without an American security
           blanket, regional powers could rearm in an attempt to balance against emerging threats. Under this scenario,
           there would be a heightened possibility of arms races, miscalculation, or other crises spiraling into all-
           out conflict. Alternatively, in seeking to accommodate the stronger powers, weaker powers may shift their geopolitical
           posture away from the United States. Either way, hostile states would be emboldened to make aggressive moves in their
           regions.
           As rival powers rise, Asia in particular is likely to emerge as a zone of great-power competition.
           Beijing’s economic rise has enabled a dramatic military buildup focused on acquisitions of naval, cruise,
           and ballistic missiles, long-range stealth aircraft, and anti-satellite capabilities. China’s strategic modernization is aimed,
           ultimately, at denying the United States access to the seas around China. Even as cooperative economic ties in the region
           have grown, China’s expansive territorial claims — and provocative statements and actions following crises in




                                                                                                                                      Page 4 of 41
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                                                            1NC SHELL (4/4)
           Korea and incidents at sea — have roiled its relations with South Korea, Japan, India, and Southeast Asian states. Still, the
           United States is the most significant barrier facing Chinese hegemony and aggression.
           Given the risks, the United States must focus on restoring its economic and fiscal condition while
           checking and managing the rise of potential adversarial regional powers such as China. While we face significant
           challenges, the U.S. economy still accounts for over 20 percent of the world’s GDP. American institutions — particularly
           those providing enforceable rule of law — set it apart from all the rising powers. Social cohesion underwrites political
           stability. U.S. demographic trends are healthier than those of any other developed country. A culture of innovation, excellent
           institutions of higher education, and a vital sector of small and medium-sized enterprises propel the U.S. economy in ways
           difficult to quantify. Historically, Americans have responded pragmatically, and sometimes through trial and error, to work
           our way through the kind of crisis that we face today.
           The policy question is how to enhance economic growth and employment while cutting discretionary spending in
           the near term and curbing the growth of entitlement spending in the out years. Republican members of Congress have
           outlined a plan. Several think tanks and commissions, including President Obama’s debt commission, have done so as well.
           Some consensus exists on measures to pare back the recent increases in domestic spending, restrain future
           growth in defense spending, and reform the tax code (by reducing tax expenditures while lowering individual and corporate
           rates). These are promising options.
           The key remaining question is whether the president and leaders of both parties on Capitol Hill have the will to act and the
           skill to fashion bipartisan solutions. Whether we take the needed actions is a choice, however difficult it might be. It is clearly
           within our capacity to put our economy on a better trajectory. In garnering political support for cutbacks, the president and
           members of Congress should point not only to the domestic consequences of inaction — but also to the geopolitical
           implications.
           As the United States gets its economic and fiscal house in order, it should take steps to prevent a flare-up in Asia. The
           United States can do so by signaling that its domestic challenges will not impede its intentions to check Chinese
           expansionism. This can be done in cost-efficient ways.
           While China’s economic rise enables its military modernization and international assertiveness, it also frightens rival powers.
           The Obama administration has wisely moved to strengthen relations with allies and potential partners in the region but more
           can be done.
           Some Chinese policies encourage other parties to join with the United States, and the U.S. should not let these
           opportunities pass. China’s military assertiveness should enable security cooperation with countries on China’s periphery —
           particularly Japan, India, and Vietnam — in ways that complicate Beijing’s strategic calculus. China’s mercantilist policies
           and currency manipulation — which harm developing states both in East Asia and elsewhere — should be used to fashion a
           coalition in favor of a more balanced trade system. Since Beijing’s over-the-top reaction to the awarding of the Nobel Peace
           Prize to a Chinese democracy activist alienated European leaders, highlighting human-rights questions would not only draw
           supporters from nearby countries but also embolden reformers within China.
           Since the end of the Cold War, a stable economic and financial condition at home has enabled America to have an
           expansive role in the world. Today we can no longer take this for granted. Unless we get our economic house in
           order, there is a risk that domestic stagnation in combination with the rise of rival powers will
           undermine our ability to deal with growing international problems. Regional hegemons in Asia
           could seize the moment, leading the world toward a new, dangerous era of multi-polarity.




                                                                                                                                       Page 5 of 41
MDAW 2012                                                                                                                             Dollar DA
KELSIE/SADAGOPAL

                                     UNIQUENESS – DOLLAR HEGEMONY HIGH

   Dollar hegemony growing
Investment Adviser, June 18, 2012 [“Healthcare gains from US strength” Lexis]

           Now the wheel has come full circle. Dollar hegemony is reasserting itself. There are credible fundamental
           reasons behind this. US property prices would seem to have bottomed out. US banks have provisioned for bad loans and
           lowered their levels of leverage. The best bank loans being made right now in the world are in the US.
           The development of shale gas has lowered energy costs for industry and consumers. Moreover, the world is prepared to
           fund a US deficit indefinitely given the lack of attractive alternatives and confidence in US political and monetary institutions.
           US assets offer both a safe haven and relatively attractive prospects for economic growth.


   Dollar hegemony is reasserting itself.
Investment Adviser, June 18, 2012 [“Healthcare gains from US strength” Lexis]

           Now the wheel has come full circle. Dollar hegemony is reasserting itself. There are credible fundamental
           reasons behind this. US property prices would seem to have bottomed out. US banks have provisioned for bad loans and
           lowered their levels of leverage. The best bank loans being made right now in the world are in the US.
           The development of shale gas has lowered energy costs for industry and consumers. Moreover, the world is prepared to
           fund a US deficit indefinitely given the lack of attractive alternatives and confidence in US political and monetary institutions.
           US assets offer both a safe haven and relatively attractive prospects for economic growth.

   Dollar is doing better against the Euro

Investment Adviser, June 18, 2012 “Healthcare gains from US strength” Lexis

           What are the implications of this for investors? US equities already trade on significantly higher valuations
           that those in Europe. Given the historic correlation between markets, European stocks that benefit from the strength of
           the dollar may now be a better bet.

           Further depreciation of the euro will boost corporate profits, particularly in industries and countries that are
           orientated towards exports or attract significant revenues in dollars. Among the industry sectors, healthcare - where blue-
           chip stocks trade at lowly valuations with attractive dividend yields but crucially also have little to no debt and lots of dollar
           exposure - stands out.

   Dollar is appreciating

Catarina Saraiva, Nov 21, 2011 [“Dollar Status Grows,” Treasury & Risk & TRBreakingNews]

           Forty-seven non-U.S. banks held balances of more than $1 billion at the New York Fed as of Sept. 30, up from 22 at the
           end of 2010, according to a survey of 80 financial institutions by ICAP Plc, the world's largest inter-dealer broker. The
           dollar has appreciated 7.2 percent since Standard & Poor's cut the nation's AAA credit rating
           Aug. 5, the second-best performance after the yen among developed-nation peers, according to Bloomberg
           Correlation-Weighted Currency Indexes.

Foreign bank deposits have buttressed the dollar

Catarina Saraiva, Nov 21, 2011 [“Dollar Status Grows,” Treasury & Risk & TRBreakingNews]

           Foreign bank deposits at the Federal Reserve have more than doubled to $715 billion from $350
           billion since the end of 2010 amid Europe's debt turmoil, buttressing the dollar's status as the
           world's reserve currency.




                                                                                                                                         Page 6 of 41
MDAW 2012                                                                                                                      Dollar DA
KELSIE/SADAGOPAL



                                           UNIQUENESS – DOLLAR STRONG

   Dollar value increasing

Catarina Saraiva, Nov 21, 2011 [“Dollar Status Grows,” Treasury & Risk & TRBreakingNews]

           The Fed's record-low target interest rate for overnight loans among banks at between zero and 0.25 percent hasn't
           discouraged dollar buying as slowing global growth and turmoil in Europe spur central banks from Australia to Brazil to cut
           rates, reducing their appeal to investors seeking higher returns.

           Foreign demand for U.S. assets rose the most in 10 months in September. Net buying of long-term
           equities, notes and bonds totaled $68.6 billion, the highest since November 2010, compared with net buying of $58 billion in
           August, the Treasury Department said Nov. 16.

           The dollar is up 6.5 percent in the past three months, recovering to about level this year with its
           nine peers, which include the Swedish krona and the Swiss franc. It's trading about 4 percent below where it was in
           1975, two years after President Richard Nixon ended the currency's official ties to gold.

           The U.S. currency rose 1.7 percent to $1.3525 per euro in the five days ended Nov. 18, gaining for a third week in a row. It
           fell 0.4 percent to 76.91 yen. The greenback traded at $1.3447 per euro and 76.90 yen as of 10:52 a.m. London time.

           Demand for Treasury securities that mature in under a year has increased as financial institutions boost holdings of the
           highest-quality assets to meet new regulations set by the Bank for International Settlements in Basel, Switzerland. Bank
           holdings of Treasuries and government-related debt totaled a record $1.69 trillion at the end of October, up from less than
           $1.1 trillion in 2008.




   Investment high now. Devaluation of the dollar hinges on curbing deficit spending.

Catarina Saraiva, Nov 21, 2011 [“Dollar Status Grows,” Treasury & Risk & TRBreakingNews]

           Options traders are increasingly betting that the dollar will strengthen. They paid 4.4 percentage
           points more for the right to sell the euro against the dollar than to buy it on Nov. 17, the most
           since the common currency's inception in 1999. The so-called three-month 25-delta risk reversal rate has
           widened for all developed-nation currencies versus the dollar and for emerging-markets such as the real and Mexican peso.

           The dollar's rise comes as a Congressional panel of six Democrats and six Republicans, known
           as the supercommittee, has until Nov. 23 to find $1.2 trillion in deficit reduction, or cause that
           much in spending cuts to go into effect beginning in 2013.
           The bipartisan group is expected to announce that it has failed to reach agreement on federal budget savings, a Democratic
           aide said. The aide, who wasn't authorized to discuss internal matters publicly and requested anonymity, said in an e- mail
           yesterday that it was highly unlikely that the talks could be salvaged.

           If Congress removes the automatic deficit cuts, Standard and Poor's may drop the nation's credit
           rating to AA, after reducing it to AA+ following the debt-cutting agreement, the ratings company said in a statement Aug.
           5 when it announced the downgrade.




                                                                                                                                  Page 7 of 41
MDAW 2012                                                                                                                       Dollar DA
KELSIE/SADAGOPAL



                                           UNIQUENESS – DOLLAR STRONG

   Despite the current state of the economy, the US Dollar is rapidly growing in value – Recent
   drastic gains on the Dow Jones Dollar Index prove
          Daily Forex (Market News and Analysis news source), “US Dollar Clears Fed Threat, Ready to Run if Fear Erupts,”
          6/23/12
           (http://www.dailyfx.com/forex/fundamental/forecast/weekly/usd/2012/06/23/US_Dollar_Clears_Fed_Threat_Ready_to_Run_
           if_Fear_Erupt.html)

           Through the opening 14 days of June, the Dow Jones FXCM Dollar Index dropped nearly 285
           points despite a deteriorating global fundamental backdrop that would normally bolster safe havens. Yet, it is a
           testament to where sentiment truly lies that the greenback regained half of the ground lost over
           that near three-week period with a single rally . There was a break on risk appetite trends these past few
           weeks that helped skew the markets to be more reactive to positive risk-based developments and discount the negative: the
           possibility that the Fed would delivery another mass stimulus infusion. With the concern that the central bank was going to
           devalue the currency and indulge short-term speculative appetite passed, the dollar is now free to move. That said,
           removing a fundamental restraint is not the same thing as applying an active catalyst. There have been plenty of negative
           developments over the past two weeks that were overlooked under the belief that the central bank would neutralize their ill-
           effects. It would stand to reason then that the market has some adjustment to do to match price with fundamental value.
           Unfortunately, a speculatively-directed market does not fit into such a tidy picture. There will be a natural bearish
           bias tugging on risk trends and nudging the greenback forward because of the events of the
           past few weeks as well as the general course of growth and yield expectations. However, the markets
           are still dazed and sluggish in the wake of such a dramatic shift in the outlook. What we need is an active catalyst
           to decide our next trend. Moving forward, there is plenty of data on the economic docket; but few of these releases
           will truly exploit the underlying concerns of global investors. Perhaps one of the few things on the tape ahead
           that can alter the current of sentiment is the EU Summit. As reality that the Greek election and open-ended
           promise of a Spanish bank rescue doesn’t proactively curb the region’s crisis sets in, traders will be expecting something
           sweeping from struggling policy group to finally change the course of the world’s largest collective economy. This may
           end up have the same influence as the Fed rate decision – dampening efforts to take large trades
           on the chance that something substantial is offered.


   Dollar to continue appreciating – increasing in value against the Euro
          Bloomberg News, “Dollar Rises Versus Euro as Fed Maintains Stimulus,” 6/23/12
           (http://www.businessweek.com/news/2012-06-23/dollar-rises-versus-euro-as-fed-maintains-stimulus)

           The dollar rose for the first time in three weeks versus the euro as the Federal Reserve refrained from
           additional asset buying while extending its maturity- extension plan, trimming bets on debasing the U.S.
           currency. The euro depreciated against the greenback as German Chancellor Angela Merkel opposed direct bailout
           funding to address the bloc’s debt crisis, which played a role in the U.S. central bank lowering its economic-growth forecast.
           The yen weakened versus all of its 16 most-traded counterparts amid speculation monetary stimulus may be expanded to
           bolster the economy. European Union leaders will meet in Brussels on June 28-29, the 19th summit since Greece’s financial
           meltdown rattled the euro. “The growth data has been pretty soft and the Fed’s forecast was more
           pessimistic than anticipated,” Alan Ruskin, global head of Group-of-10 foreign-exchange strategy at Deutsche Bank
           AG in New York, said in a telephone interview. “The dollar is tending to benefit from less of a risk bounce
           than anticipated.” The dollar added 0.5 percent this week to $1.2570 per euro in New York. The
           shared currency rose 1.6 percent to 101.10 yen, touching its highest point since May 22. Japan’s currency fell 2.2 percent to
           80.43 per dollar, reaching the weakest level since May 2. Euro Bets Futures traders decreased their bets that the euro will
           decline against the U.S. dollar, figures from the Washington- based Commodity Futures Trading Commission show. The
           difference in the number of wagers by hedge funds and other large speculators on a decline in the euro compared with
           those on a gain -- so-called net shorts -- was 141,066 contracts on June 19, compared with net shorts of 195,187 a week
           earlier. They reached a record of 214,418 the week ended June 5. The British pound was the second-biggest loser against
           the greenback this week, declining 0.8 percent to $1.558. The South Korean won was the biggest winner against the U.S.
           currency, appreciating 0.8 percent to 1,157.05 per dollar. The Dollar Index, which Intercontinental Exchange Inc. uses
           to track the greenback against the currencies of six U.S. trading partners, added 0.7 percent to 82.212 this week,
           its biggest weekly increase since May 25.




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                                                       LINK – STIMULUS/PUBLIC WORKS

   Public works projects like the plan result in loss of capital, inflation and devaluation of the
   dollar

Younkins No date [Ed Younkins, Prof. Accountancy @ Wheeling Jesuit University. Author of Capitalism and
Commerce:Conceptual Foundations of Free Enterprise, “Government Stimulus Packages are Attempts to Deny
Reality” Rebirth of Reason, accessed 7-4-2012,
http://rebirthofreason.com/Articles/Younkins/Government_Stimulus_Packages_are_Attempts_to_Deny_Reality.shtml]

           Keynes’s solution to unemployment is an increase in government spending. His theory thus shifts from the
           classical economists’ concern with production to a concern with consumption. He said that when supply outstrips demand some goods will not be sold and, as a
           result, production and employment will be cut back. His proposed solution is to increase consumption through government spending. Keynes says that general
           overproduction is the problem and that men are unemployed because they have produced too much. His proposed solution is to stimulate consumption and beat
           down production. He says that “aggregate demand” can be too low relative to “aggregate supply” and that government spending is needed to fill the gap left by
           private-sector demand to ensure full employment. For Keynes, spendthrifts, rather than savers, are virtuous. He holds that both consumer spending and government
           spending are the means to economic growth. His spending theory has enjoyed great popularity with statists who equate government spending with economic
                                                                                                               He
           stimulus. Keynes’s solution for stimulating the economy is to have the government spend money thus bridging the gap between savings and investment.
           advocates government schemes to pump up consumption such as printing and spending new money
           (which debases the currency and results in inflation), deficit spending, public works projects, higher
           taxes on producers, and the punitive graduated income tax which puts more money in the hands of the poor,
           who are said to spend a greater portion of their income. Keynes maintains that sometimes people want to hoard money instead of
           saving it. When this money is withheld from investment, the result is unemployment which, in turn, causes overproduction. Unemployed people are not able to buy
           the previous output of products and depression results. According to Keynes, there will be an absence of savings during a depression as people withdraw money to
           survive. He goes on to say that (1) without savings there will be no investment; (2) without investment there will be no employment; (3) without employment there will
           be no spending; and (4) without spending there will be unsold goods. Keynes explains that savings can overshoot the demand for investment in capital equipment,
           resulting in excess savings and the withdrawal of funds from circulation and from the necessary sufficient demand for goods. Drawing money away from the purchase
           of finished commodities makes them less profitable at the very same time that firms are seeking to set up additional capital resources to produce finished
           commodities. Keynes maintains that a deficiency of purchasing power is inevitable, resulting in an increased supply of, and a diminished demand for, products. As a
           result, profitable production cannot be continued and crises and depression begin. Keynes’s solution for preventing or alleviating depressions is to either reduce the
           amount of savings or to stimulate consumption through government spending and/or the issuance of new money. Keynes says that in a free market interest rates fail
           to perform the function of a market clearing price and that wage rates do not adjust. The result is underconsumption and unemployment in an unregulated economy.
           As a cure to bolster consumption, he proposed state management of the money market to supplement fiscal policies with respect to taxation and government
           spending. Economic Recovery Requires Savings and Capital Accumulation In a recent two-part article posted in
           his blog, economist George Reisman explains that the economy is not functioning correctly because it has
           lost capital which is accumulated on the underpinning of savings. He observes that recessions stem from the
           effort to build capital on a foundation of credit expansion rather than on savings. Such credit expansion
           causes overconsumption and the loss of capital due to bad investments. The housing bubble is a prime example of
           overconsumption and bad investments caused by credit expansion as many loans were made to “homebuyers” who were not worthy of the amount of credit involved.
           Although the houses represented capital to the homebuilders and to the financing banks, they did not represent wealth to the unworthy “purchasers” who had not
           contributed comparable wealth and capital to the economic system and who had no realistic possibilities of doing so. To add to the problem, many of these people
           borrowed using the increased market value of their homes as collateral and then spent what they had borrowed. Their consumption came at the expense of capital
           that had been invested by others in the economy. When the housing bubble burst and house prices fell drastically, the effect accentuated the losses experienced by
           lenders as people abandoned their houses thus requiring the creditors to lose by the amount of the decreases in the prices of their houses. This loss of capital is
           what caused a large decrease in the amount of available credit, resulting bankruptcies, unemployment, and decreased consumption expenditures. Lenders currently
                                                                                                          Reisman
           do not know which prospective borrowers to trust due to the problems of the capital markets that accompanied the bursting of the housing bubble.
           explains that economic recovery requires that the economy must rebuild its stock of capital and that to
           do so necessitates greater savings relative to consumption. Greater savings and the accumulation of
           new capital is needed to make up for the losses brought about by credit expansion and the overconsumption
           and bad investments that stemmed from it. Government Spending Does Not Bring Prosperity He emphasizes
           that the use of stimulus packages will result in the additional loss of capital. A stimulus package begins with the
           consumption of already produced wealth that is a component of the capital of the business that owns it. The money received by the company does not come the
           production of any corresponding comparable wealth on the part of the government or by those to whom the government has given the money. When the good
           consumed by a non-producer is replaced, the result is the consumption of some of the firm’s assets. In turn, the replacement production is followed by additional
           consumption. Each succeeding act of production is accompanied by new consumption that is equal to it. It is clear that real economic recovery requires increases in
           production that exceed increases in consumption and that stimulus packages only aggravate the problem of the loss of capital that is the fundamental cause of
           economic recession. Government demand-management policies aimed at stimulating economic activity do not and cannot create any new wealth—economic
           stimulants will not succeed. Government stimulus proposals are illogical. The government cannot inject money into the economy
           without first removing it from the economy. The government can distribute funds only by collecting more taxes, borrowing from the private sector, or printing additional
           money. There can be no stimulus if the government increases the ability of some people to spend by decreasing other people’s ability to spend. When a government
           taxes or borrows it simply transfers spending power from private owners to political spenders. By taxing people who create real wealth, the government impairs the
           process of wealth-generation and diminishes the likelihood of economic recovery. In addition, people who lend money to the government bypass the private sector
                                                                        the result is inflation which, in turn,
           uses for which that money could have been employed. Furthermore, when the government prints money
           leads to hesitant businessmen and entrepreneurs and continuing capital decumulation. The additional
           “profits” due to inflation are taxed as though they are true profits thereby impairing the ability of companies to replace their assets. All of these result in a less than
           zero-sum game because government handouts are likely to be less productive (or even counterproductive) and because money distributed by the government
           creates less because government employees such as tax collectors and dispensers have to be paid. On top of all of this,         a stimulus plan will
           devalue United States currency.




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                                                                LINK – TRANSIT SPENDING

   Transit spending is wasteful deficit spending

Acosta 2-2-12 [Allison, Director of the Thomas A. Roe Institute for Economic Policy Studies at the Heritage Foundation, “Will Transit
Reauthorization Be Another Spending Boondoggle?” http://www.heritage.org/research/reports/2012/02/transportation-program-
reauthorization-another-big-spending-problem]

             It is past time for Washington to stop spending money on wasteful projects and to live within its means. This should start with the first major opportunity of the year:
             reauthorization of the transportation program. Rather than increasing spending and then looking for new sources of revenue to pay for it, Congress
             should eliminate wasteful transportation programs and reduce spending so that the program
             lives within its means. Bloated Spending Outpaces Taxes The federal highway program was created in 1956 to build the interstate highway
             system, which would connect all major cities spanning both coasts and reaching both borders. The program was funded by a federal fuel tax, originally 3 cents per
             gallon of gasoline. The original plan was to turn over the maintenance to the states after the interstate highway system was completed. But, as Ronald Reagan
             famously quipped, “a government bureau is the nearest thing to eternal life we’ll ever see on this earth!” Thus, rather than turning a modest program over to the
             states, the highway program was vastly expanded and the gas tax increased to where it stands today at 18.3 cents per gallon.[2] Not content to live within the
             means of the Highway Trust Fund and its dedicated funding, Congress added scores of new programs accompanied by new spending on all manner of projects that
             hardly fall within the purview of a transportation system. In fact, these programs in the past have diverted around 38 percent of the trust fund spending to things other
             than general-purpose roads, leaving America’s drivers with a mere 62 percent of every gas tax dollar they pay funding the roads they actually use.[3] Many of these
             programs can only be thought of as luxuries, such as scenic byways, ferryboats, bicycles, historic covered bridges, and horse trails. Others include    transit
             (which largely goes to fund trolleys, buses, commuter rail, etc., and serves only 1.8 percent of surface travel passengers); the enhancement program (under which
             states are currently forced to spend money on projects like facilities for pedestrians and bicycles, scenic easements including historic battlefields, landscaping and
             other scenic beautification, historic preservation, and transportation museums); and recreational trails.[4] These programs reached new complexity and
             magnitude in SAFETEA-LU and help explain the new heights that spending reached under this bill. They also help explain the bailouts from general revenue of $35
             billion, which began in 2008.[5] The picture for the future continues to look bleak. Gas tax revenues have not grown to keep pace with transportation needs, let
             alone the burgeoning wants of Congress and the vast collection of special-interest groups and their lobbyists. The most recent forecast by CBO[6] projects that the
             trust fund will run out of money sometime in 2013 with a deficit of $12 billion and cumulative deficits of $136 billion through 2022. Even this may be a conservative
                                                                                                                    The federal government is projected to
             estimate given the way CBO projected both taxes and spending.[7] Transportation Goals vs. Wasteful Spending
             run deficits in the trillion-dollar range through the end of the decade, reaching $1.5 trillion in 2022.
             Transportation spending is one contributor to this gloomy outlook. As a first step toward the larger goal of
             solving the nation’s spending and debt crisis, Congress should make the transportation program
             live within its means. It should reserve the program exclusively for improving mobility and safety and decreasing congestion. This means Congress
             should strip out or trim wasteful programs like the enhancement program, transit, and Amtrak. Gone should be plans for quaint cobblestones, hiking trails, tourist
             attractions and archaeology, streetscapes and flower planting projects, and the excess spending they represent. Eliminate Waste and Reduce Spending The
             current reauthorization bills (S. 1813 and H.R. 7) contain some important reforms. For example, both versions put an end to the corruptive and wasteful practice of
             earmarks. The Senate version would allow states the flexibility to spend enhancement program money on roads as opposed to projects like a road museum. The
             House version would start to remove Amtrak’s wasteful subsidy and require operational improvements. Sadly, however, both bills would continue funding the
             program at bloated levels similar to today’s, leading to the need for more revenues or bailouts by the general fund. The solution that each bill offers is more revenues.
             The House bill, for example, purports to generate oil and gas royalty revenues by opening up areas now restricted to exploration. This is a sound policy.
             Unfortunately, it doesn’t solve the true problem: spending. Instead, it locks in higher levels of spending rather than preserving royalty
             revenues for deficit reduction. Rather than perpetuating ever-growing government, albeit with a somewhat improved and streamlined transportation program,
             Congress should live within its means. Instead of bailouts, this means eliminating wasteful programs and cutting the spending that goes with them.




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                                                                   LINK – HIGH SPEED RAIL

   Federal government funding for HSR wrecks the perception of deficit reduction

Samuelson 11(Robert, writer for Newsweek and Washington Post, “High-Speed Rail Is a Fast Track to Government
Waste,” Daily Beast, Feb 16, http://www.thedailybeast.com/newsweek/2011/02/16/high-speed-rail-is-a-fast-track-to-
government-waste.html)
          There's something wildly irresponsible about the national government undermining states'
          already poor long-term budget prospects by plying them with grants that provide short-term jobs.
          Worse, the rail proposal casts doubt on the administration's commitment to reducing huge budget
          deficits. How can it subdue deficits if it keeps proposing big spending programs? High-speed rail would definitely be big.
          Transportation Secretary Ray LaHood has estimated the administration's ultimate goal—bringing high-speed rail to
          80 percent of the population—could cost $500 billion over 25 years. For this stupendous sum, there would be
          scant public benefits. Precisely the opposite. Rail subsidies would threaten funding for more pressing
          public needs: schools, police, defense. How can we know this? History, for starters. Passenger rail service
          inspires wishful thinking. In 1970, when Congress created Amtrak to preserve intercity passenger trains, the idea
             was that the system would become profitable and self-sustaining after an initial infusion of federal money. This never
             happened. Amtrak has swallowed $35 billion in subsidies, and they're increasing by more than $1
             billion annually.


   High speed rail explodes deficit spending without growing economy

Goff and Boccia 2-28-12 [Emily & Romina, “Infrastructure Spending would not create jobs, revive economy,”
http://www.heritage.org/research/reports/2012/02/president-obamas-2013-budget-delivers-tax-hikes-more-spending-
more-debt]
             When it comes to infrastructure spending, the President is once again using the term “investment” as a synonym for “spending.” The billions of dollars the President
             wants to “invest” in infrastructure in his FY 2013 budget would do little to spur job creation in America. Neither would his proposal to establish a national infrastructure
             bank aid economic revival. The President’s “job-creating infrastructure investments,” or spending on the transportation budget, cover $50 billion to
                                                                                                                                                   would
             “jumpstart” transportation projects in 2012, and a six-year, $476 billion proposal for surface-transportation projects, including high-speed rail. This
             amount to a $135 billion increase in spending, which the President proposes to pay for with phony war savings. As taxpayers painfully learned
             during the past few years, stimulus spending does manage to rack up deficits and debt, but it does little to grow the economy and
             create jobs. Ditto infrastructure “investing.” After reviewing a series of studies on the relationship between infrastructure spending and economic
             activity, former Heritage Foundation analyst Ronald Utt concluded that any impact of increased infrastructure spending on jobs would
             be modest and delayed. An influential study commissioned by the U.S. Department of Transportation suggesting that $1 billion of federal highway spending
             would produce the equivalent of 47,576 jobs for one year should be viewed with caution. As Utt explained: Regardless of how the federal government raised the
             additional $1 billion, it would shift resources from one part of the economy to another, in this case to road building. The only way that $1 billion of new highway
             spending can create 47,576 new jobs is if the $1 billion appears out of nowhere as if it were manna from heaven.[13] Moreover, Utt also explained why an
             infrastructure bank is not truly a bank, but another means of using taxpayer dollars to fund transportation projects: [T]he common meaning of a “bank” describes a
             financial intermediary that borrows money at one interest rate and lends it to credit-worthy borrowers at a somewhat higher interest rate…the Obama proposal is not
             a bank, and it relies entirely on congressional appropriations—thus, on deficit finance and taxpayer bailouts. (emphasis in original)[14] A more productive policy
             would be creating public–private partnerships to address infrastructure needs as a step in the right direction. These partnerships amount to a non-tax means of
             financing transportation projects, focusing on private-sector involvement and user fees where possible. The President also proposes spending $47 billion over six
             years, plus $6 billion in 2012, to fund the development of high-speed rail and other pas-senger-rail programs. High-speed rail is a costly form of
             transportation, and it is afflicted with lower-than-expected ridership rates, rising ticket prices, and exorbitant
             government subsidies. Other countries’ experiences with high-speed rail systems—such as Japan’s, the U.K.’s, and
             France’s—should serve as a lesson to the United States. Domestically, California is an example of how the costs for
             high-speed rail projects often surpass original projections and further burden taxpayers, who are already
             struggling with a weakened economy and increasing budget deficits. More infrastructure spending is not the way
             to get the economy back to running at full speed. Increased government spending only diverts resources from the
             more efficient private sector to the public sector and fails to deliver the jobs its supporters claim it will. Americans
             would simply get more spending and more debt.




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                                                       LINK – INFRASTRUCTURE BANK

   Infrastructure bank explodes deficit spending without growing economy

Goff and Boccia 2-28-12 [Emily & Romina, “Infrastructure Spending would not create jobs, revive economy,”
http://www.heritage.org/research/reports/2012/02/president-obamas-2013-budget-delivers-tax-hikes-more-spending-
more-debt]

           When it comes to infrastructure spending, the President is once again using the term “investment” as a synonym for
           “spending.” The billions of dollars the President wants to “invest” in infrastructure in his FY 2013
           budget would do little to spur job creation in America. Neither would his proposal to establish a
           national infrastructure bank aid economic revival. The President’s “job-creating infrastructure investments,” or
           spending on the transportation budget, cover $50 billion to “jumpstart” transportation projects in 2012, and a six-
           year, $476 billion proposal for surface-transportation projects, including high-speed rail. This would amount to a $135
           billion increase in spending, which the President proposes to pay for with phony war savings. As taxpayers painfully
           learned during the past few years, stimulus spending does manage to rack up deficits and debt, but it does little
           to grow the economy and create jobs. Ditto infrastructure “investing.” After reviewing a series of
           studies on the relationship between infrastructure spending and economic activity, former Heritage Foundation analyst
           Ronald Utt concluded that any impact of increased infrastructure spending on jobs would be modest
           and delayed. An influential study commissioned by the U.S. Department of Transportation suggesting that $1 billion of federal highway spending would
           produce the equivalent of 47,576 jobs for one year should be viewed with caution. As Utt explained: Regardless of how the federal government raised the additional
           $1 billion, it would shift resources from one part of the economy to another, in this case to road building. The only way that $1 billion of new highway spending can
                                                                                                               an
           create 47,576 new jobs is if the $1 billion appears out of nowhere as if it were manna from heaven.[13] Moreover, Utt also explained why
           infrastructure bank is not truly a bank, but another means of using taxpayer dollars to fund transportation projects:
           [T]he common meaning of a “bank” describes a financial intermediary that borrows money at one interest rate and lends it to
           credit-worthy borrowers at a somewhat higher interest rate…the Obama proposal is not a bank, and it relies entirely on
           congressional appropriations—thus, on deficit finance and taxpayer bailouts. (emphasis in original)[14]




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                                              INTERNAL LINK – FAST DECILNE

   A Slow transition of the dollar is expected to occur over the next decade. Increasing the
   budget deficit places the dollar in immediate risk of losing reserve currency status.

Anthony Hughes, 2009 [First Edition, Lexis, October 8, 2009, “Currency status takes a beating; US dollar,” Lexis]

           The future of the greenback as the world's reserve currency has come under a further cloud
           amid renewed talk that some countries are pushing for alternatives, adding to pressure on the
           US to rein in its expanding budget deficit.
           Officials from several countries including Japan, Russia and Saudi Arabia yesterday denied reports they had held secret meetings about a
           replacement for the US dollar as the currency for pricing oil, but not before the greenback dropped and gold soared to a record high.

           A report in the UK newspaper, The Independent, on Tuesday US time said Gulf states had held talks with authorities
           from Russia, China, Japan and France to agree on a basket of currencies for the daily pricing,
           challenging the hegemony of the US dollar. It said American officials were aware of the meetings, which are
           seen as just the latest development in a gradual transition away from the US dollar as the reserve
           currency in the next decade.
           The US dollar has slumped 15 per cent against the world's major currencies over the past six months, prompting investors to pour into
           gold and commodities to escape the weakening greenback.
           Still, currency traders said the US dollar's fall, which has coincided with the rebound in stocks, would help rebalance the global
           economy, encouraging exports as Americans come under pressure to spend less and save more.

           Last week, Federal Reserve chairman Ben Bernanke said the US dollar was not at any immediate
           risk of losing its status as a reserve currency, but could be if the US didn't get its "economic
           house in order". This came after World Bank president and former US deputy secretary of state Robert
           Zoellick said the US dollar's dominance would be challenged as the financial crisis reshaped the
           global economy.
           He said the US dollar would remain a major currency but its fortunes depended on America's
           choices on inflation, the budget deficit and financial reform.




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                                             INTERNAL LINK – FAST DECLINE

   Fast Decline Bad – interest rates on assets decrease, stall economy.
       Elwell 12 [“The Depreciating Dollar: Economic Effects and Policy Response” Craig K. Elwell        Specialist in Macroeconomic
        Policy February 23, 2012]

            Although asset market trade offers opportunities to raise overall economic efficiency and
            improve the economic welfare of borrower and lender alike, trade in assets is prone to occasional
            volatility, the disorderly resolution of which can lead to financial disruption and, more broadly, a
            slowing of economic growth. The essential weakness of asset markets is that assets are a claim on a stream of
            earnings over time—and the future is always uncertain. This can mean that relatively small changes in investors’ beliefs
            about that future could have large effects on the value of the asset. Historically, this has tended to make these markets
            much more volatile than goods markets, in which value is generally far less contingent on the uncertainties of the future.
            Add to this the often observed tendency for “herd-like” behavior among investors, particularly those focused on the short
            run, and the volatility in asset markets can grow larger. Then add in leveraged purchases, the inherent weakness of
            modern fractional-reserve banking, exchange rate risk, and the usual problems of distance (i.e., different language, law,
            and business practices) and the potential for volatility and crisis becomes even larger. There is no precise
            demarcation of when a falling dollar might move from being an orderly decline to being a crisis,
            but the depreciation would be significantly more rapid than the orderly fall that has already
            occurred. The troubling characteristic of a dollar crisis would be that this adjustment could move
            from orderly to disorderly, due to a precipitous decline in the willingness of investors to hold
            dollar assets, causing a sharp decrease in the price of those assets and an equally sharp
            increase in the interest rates attached to those assets. A sudden spike in interest rates could
            slow domestic interest rate sensitive spending more quickly than the falling dollar can stimulate
            net exports. This negative impulse could cause overall economic activity to slow, perhaps to the
            point of stalling the economic recovery




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                                                        INTERNAL LINK – FAST DECLINE

   Rapid Collapse of Dollar Hegemony would backslide multilateral cooperation and global trade
   as the world splits into fragemented regional currency blocks.

Tom Holland, June 6, 2011 [“Like the sewers, world finance must flow unimpeded; Ending the US dollar’s domination
of the global monetary system is necessary but won’t be easy.” South China Morning Post]
           The international monetary system is like the sewage system: you only think about it when something goes wrong.

           In late 2008 something did go wrong. For decades, ever since the end of the second world war, international finance had been dominated by the US dollar. Central
           banks held their reserves primarily in US dollars, commodities were priced in US dollars, international trade was settled almost entirely in US dollars, and cross-
           border investment flows were denominated largely in US dollars.

           Then the world got a nasty shock. In the aftermath of the Lehman Brothers implosion, banks stopped lending. Suddenly companies everywhere found they could no
           longer get their hands on the US dollar funds they needed to conduct everyday business. International trade all but ground to a halt.

           The scare prompted governments and institutions around the world to re-examine their dependence on the US currency. China started to encourage the use of the
           yuan for settling its foreign trade, and pundits everywhere began to predict the inevitable decline of the US dollar as the world's unquestioned currency of choice for
           international transactions and foreign reserves.


           But if the US dollar does slide into terminal decline, something has to replace it. Conventional wisdom dictates
           that only one currency can dominate international finance at any one time, and usually it's the currency of the leading trading economy of the day.

           In the 5th century BC it was the Athenian silver drachma. By the 1st century BC the drachma had been displaced by the Roman aureus. Then, after repeated
           devaluations and protracted inflation, the aureus was supplanted by the Byzantine solidus, which in its turn gave way to the Arabian dinar.

           The cycle continued throughout history as empires rose and fell, until in the late 1940s the US dollar finally ousted the pound sterling as the world's main trading and
           reserve currency.
           Now, with the US economy facing the same sort of debt problems that undermined currencies from the solidus to sterling, the world is wondering what will replace the
           US dollar.


           The trouble is that neither of the obvious candidates - the euro and the yuan - looks viable. The euro
           zone's economy is almost as large as America's, the value of its international trade is similar, and its presence in international debt markets is just as big. But
           Europe's continuing financial crisis has severely damaged the euro's credibility, disqualifying it from succeeding the US dollar in the medium term.

           China too is an economic and trade heavyweight. But although Beijing would like to promote the yuan as a reserve currency, China's capital controls and its
           rudimentary banking system and capital markets rule the yuan out as a replacement for the US dollar for the foreseeable future.

           With the euro and the yuan out of the running, there are three other possibilities. The international financial system can continue, reluctantly, to rely on the US dollar.
           The world can agree to adopt a single multilateral currency unit - something like the International Monetary Fund's special drawing right - as a new reserve and
           trading currency. Or countries can move to a multi-polar system in which no single currency dominates.

           According to a report published last week by the World Bank, all three options have major problems.

           Under continued US dollar hegemony, the United States would go on enjoying the low interest rates that go with issuing the world's predominant reserve currency.
           There would be little incentive for Washington to tackle its financial problems, and the imbalances that caused the 2008 crisis would remain largely in place,
           threatening further upheavals in the future.

           Adopting a new multilateral reserve currency sounds fine in theory, but the widely differing economic imperatives of developed and developing economies mean that
           striking an agreement will surely be impossible at any time over the next couple of decades.


           That leaves moving to a multi-polar system split among the US dollar, the euro and an
           increasingly internationalised yuan. The World Bank believes this is the most likely scenario
           over the next 15 years, and that it would constitute "a more stable and symmetric global economic environment" than US dollar dominance.

           But there are problems with this option too. The chances are that it would lead to the emergence
           of three rival currency blocs, dominated by the United States, the European Union and China.

           "The existence of currency blocs might boost regional integration at the expense of multilateral
           liberalisation," the World Bank warns. "This feature may undercut multilateralism by making co-
           operation to maintain a system of global free trade seem less essential for economic prosperity."

           In other words, the decline of the US dollar and the lack of a clear successor risk sending the
           globalisation of recent years into reverse, as the world's economic system fragments into
           separate currency blocs each dominated by a regional super-power.

           That sounds like a backward step, but it may be a price the world is willing to pay to repair this particular sewage system.




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                           INTERNAL LINK – DEFICIT SPENDING KILLS DOLLAR

   Raising the deficit will result in quick and severe dollar depreciation as investments decline,
   collapsing US economic hegemony.

           Bergsten 9 [C. Fred Bersten, director of the Peterson Institute for International Economics; ‘The Dollar
           and the Deficits: How Washington Can Prevent the Next Crisis’, Foreign Affairs, Volume 88 No. 6,
           November/December 2009]

           To a large extent, the US external deficit has an internal counterpart: the budget deficit. Higher budget
           deficits generally increase domestic demand for foreign goods and foreign capital and thus promote larger current account
           deficits. But the two deficits are not "twin" in any mechanistic sense, and they have moved in opposite directions at times,
           including at present. The latest projections by the Obama administration and the Congressional Budget Office
           (CBO) suggest that both in the short run, as a result of the crisis, and over the next decade or so, as baby boomers
           age, the US budget deficit will exceed all previous records by considerable margins. The Peterson
           Institute for International Economics projects that the international economic position of the United States is
           likely to deteriorate enormously as a result, with the current account deficit rising from a previous record of six
           percent of GDP to over 15 percent (more than $5 trillion annually) by 2030 and net debt climbing from $3.5 trillion today to
           $50 trillion (the equivalent of 140 percent of GDP and more than 700 percent of exports) by 2030. The United States would
           then be transferring a full seven percent ($2.5 trillion) of its entire economic output to foreigners every year in order to
           service its external debt.
           This untenable scenario highlights a grave triple threat for the United States. If the rest of the world
           again finances the United States' large external deficits, the conditions that brought on the current
           crisis will be replicated and the risk of calamity renewed. At the same time, increasing US demands
           on foreign investors would probably become unsustainable and produce a severe drop in the value
           of the dollar well before 2030, possibly bringing on a hard landing. And even if the United States were lucky
           enough to avoid future crises, the steadily rising transfer of US income to the rest of the world to service foreign debt would
           seriously erode Americans' standards of living.

   Dollar Hegemony is stable for time being, but run away debt spending will break the façade.

Jeremy Warner, Aug 2, 2011 [The Daily Telegraph (London) “What's left to trust in the world of money?” Lexis]

           Dominant reserve currency status in any case gives the US unrivalled access to international borrowing . Dollar
           hegemony may not last for much longer, but for the time being there are no viable alternatives.

           This is both a blessing and a curse for the US - a blessing because it allows the country to keep borrowing at
           reasonable rates almost regardless of underlying public debt dynamics, and a curse because it maintains the
           addiction to debt.

           If nothing is done, the façade will eventually break; that's the point at which to run for the hills.
           Food, property, energy - these are the things that retain value when money dies.




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                            INTERNAL LINK – DEFICIT SPENDING KILLS DOLLAR


   Increasing US debt liabilities will undermine dollar.

           WSJ 9 (Wall Street Journal, Neil Shah; ‘As Budget Deficit Grows, So Do Doubts on Dollar’, 8/26/9)
           LONDON -- The U.S. economy may be showing signs of recovering from the financial crisis, but the jury is still out on the
           future of the U.S. dollar. While many analysts expect the dollar to strengthen in coming months as the
           crisis fades and the U.S. economy turns toward growth, a growing chorus of investors is
           expressing concern about the longer-term outlook for the greenback. In a new twist to an old refrain
           among economists who have long worried about, the effects of growing U.S. debt, they say that the huge liabilities the
           U.S. is taking on to dig its way out of crisis could ultimately undermine faith in the dollar. "There has been a lot
           of disappointment with the way the U.S. credit crisis was handled," says Claire Dissaux, managing director of global
           economics and strategy for Millennium Global Investments Ltd., a London investment firm specializing in currencies. "The
           dollar's loss of influence is a steady and long-term trend." On Tuesday, the Obama administration added fuel to concerns
           about the dollar, saying the U.S. will run a cumulative budget deficit of $9 trillion over the next 10 years, $2 trillion more than
           it had previously projected. "That's going to be negative for the dollar," says Adam Boyton, a currency analyst at Deutsche
           Bank AG in New York. President Barack Obama also reappointed Federal Reserve Chairman Ben Bernanke, whose efforts
           to rescue the economy have won praise, but have also entailed pumping large amounts of freshly created dollars into the
           financial system.



   Deficit spending causes crowding out – divestment due to increased interest rates would end
   the dollar as the reserve currency

Mark Thoma, 5-22-2011 [Mark Thoma is a macroeconomist and time-series econometrician at the University of
Oregon. His research focuses on how monetary policy affects the economy, and he has also worked on political
business cycle models. Mark is currently a fellow at The Century Foundation. CBS Money Watch, “Government
Deficits: The Good, The Bad, and the Ugly,” http://www.cbsnews.com/8301-505123_162-39741324/government-
deficits-the-good-the-bad-and-the-ugly/]

           The main worry about deficits is crowding out. Crowding in was just described ?€" it occurs when deficits
           cause output to go up and business confidence is increased. Crowding out comes about when deficit
           spending raises interest rates. There is a limited amount of funds available for investment, and when government
           competes with the private sector for a share of these funds to finance its deficit spending, it drives the cost of these funds
           ?€" interest rates ?€" higher. The increase in the interest rates causes investment to fall , and lower
           investment translates into lower output and lower economic growth. In addition, to the extent that the private sector
           is more efficient than the public sector, crowding out, i.e. more government spending and less private investment, can result
           in a less efficient use of resources (though in the case of public goods government can be the more efficient provider, and
           hence it is not always the case that efficiency falls).

           Another worry about deficits is that they will be monetized leading to inflation. Debt monetization occurs when the Fed prints
           new money and uses it to purchase government bonds help by the private sector. This removes debt from the private sector
           and replaces it with money, and if the money is used to purchase goods and services, as it's likely to be, this can be
           inflationary (though when there is an excess supply of goods, as in a deep recession, inflation is unlikely to be a problem).

           The Ugly
           The worst outcome would be for the deficit to get so bad that the government chooses to default
           on debt payments (which could also lead to some other currency, or a basket of currencies, replacing
           the dollar as the vehicle and reserve currency). I don't expect this to happen, particularly since we can always print
           money to pay off our debts. But printing money to pay off debt could be highly inflationary, it could lead to high interest rates
           as foreigners refuse to lend to us for fear we'll inflate the obligation away when it comes due, and the government could still
           choose to default if it is the least costly option among bad alternatives. Thus, it needs to be mentioned as a possibility.




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                         INTERNAL LINK – DEFICIT SPENDING KILLS DOLLAR

   Reducing imbalances in the deficit is key to sustaining confidence. Any disruption in
   confidence will end the dollars role as the reserve currency

C Rangarajan & Michael Debabrata Patra 3-16-2012 [Economic & Political Weekly, “Can the SDR become a
Global Reserve Currency? Lexis]

While the emergence of the euro has resulted in a small decline in the role of the US dollar over the past decade, the
latter has maintained its dominance. Over time, the ease and security involved with investing in US markets has led
the rest of the world to take on massive levels of nancial exposure to the US. The value of foreign residents'
investments in US companies, real estate, capital markets, and government debt was nearly half of non-US global
GDP as of end-2008. Changes in US monetary policy and nancial conditions have had a direct wealth impact on
foreign residents, inuencing their expenditures, and posing a difcult dilemma for foreign investors. Individually, foreign
investors have an incentive to diversify their portfolios as a matter of prudent risk management. Collectively, however,
foreign investors have a strong incentive to maintain their holdings of dollar assets to avoid the risk of dollar
depreciation that could undermine their investments.

Developments since 2008 have challenged the international nancial architecture and the pre-eminence of the US
dollar. In the aftermath of the global nancial crisis of 2008-09, con- dence in the US economy has been shaken by its
persisting structural imbalances. The US current account has been negative for the past 20 years, reaching 5% of
GDP before the global crisis before declining to 3.1% in 2010. The budget decit stands at more than 9% of GDP and
will be difcult to reduce. These decits are not offset by sufcient levels of domestic saving. On the contrary, the savings
rate of private households is a mere 4% of GDP. Capital inows from the rest of the world have nanced these decits.
Foreign investors account for more than 50% of new subscriptions to US government bonds. This makes the US by far
the most highly indebted country in the world. Reducing these imbalances will take many years and will require a
highly cautious political strategy if shocks are to be avoided . Any disruption of confidence in the sustainability of
 the US economy would make it impossible for the dollar to play its role as international reserve currency.




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                           INTERNAL LINK – DEFICIT SPENDING KILLS DOLLAR

Further deficit spending will tank investment and destroy dollar status as reserve currency.

Jeremy Warner, Nov 4, 2010 [The Daily Telegraph (London), “Fed's $600bn gamble risks throwing away America's
strongest asset” Lexis]

           The fresh $600bn (£372bn) infusion of quantitative easing announced yesterday may or may not lift beleaguered domestic
           demand - both Goldman Sachs and HSBC have said much more is needed to escape a real or imagined liquidity trap - but
           one thing it does do is further debauch the currency. Never before has dollar hegemony been so much under
           threat.
           By flooding the world economy with yet more freshly-minted dollars, America further undermines faith in the greenback as
           an internationally reliable store of value and is thereby squandering an economic and geo-political asset of huge importance
           to its history.

           The dollar's reserve currency status means America can borrow at will in its own currency from
           the rest of the world, and at favourable rates to boot. This privilege is being recklessly thrown away. Every time the
           Fed prints more dollars to fight the domestic recession, it further devalues that debt. Lenders are understandably getting
           restless.

           As is now becoming steadily more apparent, dollar hegemony was a major underlying cause of the crisis, for it allowed
           America to go on an unrestrained borrowing binge - the developing world is ever more minded to think its demise part of the
           solution.

           The Fed is taking a massive gamble with America's long-term future by blindly pursuing further
           stimulus; it may take time, but the dollar's all-powerful reign on the world stage is drawing to a
           close. And officials wonder why US business remains in a state of paralysed shock. Policy
           seems hell-bent on destruction.
           In Mr Obama's defence, it is usually said that the economic legacy he inherited was so poisonous that it was never likely to
           be easily fixed, and there is no doubt much truth in this contention.

           But rather than focusing like a laser on the economic catastrophe unfolding before him, Mr Obama instead embarked on a
           wildly ambitious, disruptive and divisive legislative programme that has succeeded only in heaping further uncertainty on
           already damaged economic confidence.

           If ever more mountainous public debt were not deterrent enough to investment and trade, the
           clutter of futile reform emerging from the White House would have frightened even the most loyal
           of American investors into inaction.




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                            INTERNAL LINK – DEFICIT SPENDING KILLS DOLLAR

   Deficit Spending raises interest rates and crowds out private investment, decreasing the value
   of the dollar

Baumol & Blinder 2011 [William, Prof. Economics @ NYU & Princeton and super famous economist, & Alan, Prof.
Economics @ Princeton and super famous economist, Economics: Principles & Policy, found at “Crowding-Out and
Crowding-In,” Economist’s View, http://economistsview.typepad.com/economistsview/2008/12/crowding-out-an.html]

            So far, we have looked for possible problems that the national debt might cause on the demand side of the economy. But
            the real case for cutting the deficit or raising the surplus in the United States comes on the supply side.
            In brief, large budget deficits discourage investment and therefore retard the growth of the nation's
            capital stock. Conversely, budget surpluses speed up capital formation and growth.
            The mechanism is easy to understand by presuming (as is generally the case) that the Fed does not engage in any
            substantial monetization. We have just seen that budget deficits tend to raise interest rates. By the same logic,
            budget surpluses tend to reduce interest rates. But we know from earlier chapters that the rate of interest (r) is a
            major determinant of investment spending (I). In particular, higher r leads to less I, and lower r leads to
            more I. The volume of investment made today will, in turn, determine how much capital we have
            tomorrow -and thus influence the size of our potential GDP. This, according to most economists, is the true sense in
            which a larger national debt may burden future generations and a smaller national debt may help them:
            A larger national debt may lead a nation to bequeath less physical capital to future generations. If
            they inherit less plant and equipment, these generations will be burdened by a smaller productive capacity-a lower potential
            GOP. In other words, large deficits may retard economic growth. By the same logic, budget surpluses can stimulate capital
            formation and economic growth.
            Phrasing this point another way explains why this result is often called the crowding-out effect. Consider what
            happens in financial markets when the government engages in deficit spending. When it spends more than it
            takes in, the government must borrow the rest. It does so by selling bonds, which compete with
            corporate bonds and other financial instruments for the available supply of funds. As some savers
            decide to buy government bonds, the funds remaining to invest in private bonds must shrink.
            Thus, some private borrowers get "crowded out" of the financial markets as the government claims an
            increasing share of the economy's total saving.
            Some critics of deficit spending have taken this lesson to its illogical extreme by arguing that each $1 of government
            spending crowds out exactly $1 of private spending, leaving "expansionary" fiscal policy with no net effect on
            total demand. In their view, when G rises, I falls by an equal amount, leaving the total of C + I + G + (X - IM) unchanged.


   US deficit spending pushes investors to emerging markets. Job growth will not stop
   divestment.

Bloomberg 2011 [Cordell Eddings, “Gross says Fear ‘Mindless’ US Deficit Spending,” Bloomberg.com,
http://www.bloomberg.com/news/2011-01-05/pimco-s-gross-says-investors-should-fear-mindless-u-s-deficit-
spending.html]
           Pacific Investment Management Co.’s Bill Gross said investors should favor emerging market[s]
           corporate and sovereign debt as “mindless” U.S. deficit spending may result in higher inflation, a weaker
           dollar and the eventual loss of America’s AAA credit rating.

            Buying debt in emerging market countries with higher real interest rates, wider credit spreads and strong
            balance sheets will offer more return as well as protection from dollar depreciation as U.S policy
            makers run up record deficits at the expense of economic growth, Gross, the manager of the
            world’s biggest bond fund, wrote in his monthly investment outlook.
            “The problem is that politicians and citizens alike have no clear vision of the costs of a seemingly
            perpetual trillion dollar annual deficit,” Gross wrote in a note on Pimco’s website today. “As long as the
            stock market pulsates upward and job growth continues, there is an abiding conviction that all is
            well and that ‘old normal’ norms have returned. Not likely. There will be pain aplenty.”




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                                              IMPACT INTERNAL – HEGEMONY

   Dollar collapse obliterates U.S. global leadership

Taylor 5 (Jay, Editor – Gold & Technology Stocks, Gold Digest, 1-21,
http://www.gold-eagle.com/gold_digest_05/taylor012105.html)

           Given my views that we are inevitably headed toward a deflationary cleansing of the excesses of the market, I have always
           had a sense that at some point the dollar would show surprising strength. But given the U.S. addiction to foreign
           capital, I have come more recently to believe that avoiding a major collapse of the U.S. dollar is a policy that
           must be maintained at virtually all costs. It is a well-documented fact that we Americans have enjoyed a
           consumption spree beyond belief because of low interest rates made possible by foreigners reinvesting their export
           earnings in the U.S. What fewer people have focused on, however, is the really big reason why the U.S. cannot afford
           to let the dollar fall too far, even if defending it means a collapse of the U.S. housing and equity market and an
           evolution into the Kondratieff winter depression. The survival of an American empire that can send its
           military into foreign lands to secure sources of oil, secure trade routes, and intimidate foreign leaders into "playing
           ball" requires that the dollar remain the world's reserve currency. Nothing is more important to the
           survival of U.S. superpower status than the dollar remaining as the world’s reserve currency.


   Weaker dollar kills US Hegemony

New Straits Times (Malaysia), 7-1-2008 [“Bringing an end to global hegemony,” Lexis]

           The adverse consequences of the declining dollar go beyond oil and food. Since the US runs huge
           trade deficits with countries like China and Japan, the declining dollar will not be in the interest of the latter. Neither will it be
           in the interest of countries that hold most of their foreign exchange reserves in the dollar. A number of them are already
           feeling the effects of the diminishing value of their reserves.
           It is not surprising, therefore, that countries are converting part or whole of their reserves into
           other currencies, notably the euro. Some oil-producing countries are also switching to other
           currencies. Expectedly, these moves have further weakened the dollar.
           The US is not happy about this, though a weaker dollar may boost its exports and reduce its trade deficit marginally. The
           US knows that it is the dominant position of the dollar that enables it to exercise global financial
           and economic hegemony. It is because the dollar is the world's reserve currency that the US has
           so much political clout in the international arena. This is why the dollar has been described as one
           of the two principal pillars of US global hegemony, the other being its military power.




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                                                         IMPACT INTERNAL – HEGEMONY

   Deficit Spending causes dollar decline and destroys US Primacy

The Atlantic 4-26 2012 http://www.theatlantic.com/international/archive/2012/04/the-end-of-pax-americana-how-
western-decline-became-inevitable/256388/?single_page=true “The End of Pax Americana: How Western Decline
Became Inevitable”

                                    two biggest domestic threats to U.S. power are the country's bleak fiscal
            Indeed, looking forward a decade, the
            outlook and deepening doubts about the dollar's future role as the international economy's
            reserve currency.Economists regard a 100 percent debt-to-GDP ratio as a flashing warning light that a country is at risk of defaulting on its financial
            obligations. The nonpartisan Congressional Budget Office (CBO) has warned that the U.S. debt-to-GDP ratio could exceed that level by 2020--and swell to 190
                                CBO recently warned of the possibility of a "sudden credit event" triggered by
            percent by 2035. Worse, the
            foreign investors' loss of confidence in U.S. fiscal probity. In such an event, foreign investors
            could reduce their purchases of Treasury bonds, which would force the United States to borrow
            at higher interest rates. This, in turn, would drive up the national debt even more. America's
            geopolitical preeminence hinges on the dollar's role as reserve currency. If the dollar loses that
            status, U.S. primacy would be literally unaffordable. There are reasons to be concerned about the dollar's fate over the next two
            decades. U.S. political gridlock casts doubt on the nation's ability to address its fiscal woes; China is beginning to internationalize the renminbi, thus laying the
            foundation for it to challenge the dollar in the future; and history suggests that the dominant international currency is that of the nation with the largest economy. (In
            his piece on the global financial structure in this issue, Christopher Whalen offers a contending perspective, acknowledging the dangers posed to the dollar
                                                                                            aside the fate of the
            as reserve currency but suggesting such a change in the dollar's status is remote in the current global environment.) Leaving

            dollar, however, it is clear the United States must address its financial challenge and restore the
            nation's fiscal health in order to reassure foreign lenders that their investments remain sound. This
            will require some combination of budget cuts, entitlement reductions, tax increases and interest-rate hikes. That, in turn, will surely curtail the amount of spending
            available for defense and national security--further eroding America's ability to play its traditional, post-World War II global role   .

   Continued spending results in decreased investor confidence, turmoil, war, and less
   unconditional allied support.
      The National Interest Christopher Whalen | 5-25-2012 http://nationalinterest.org/article/us-debt-culture-the-dollars-fate-
        6798?page=5

            IF AMERICA can restrain its libertine impulses and get its fiscal house in order, the reality of an open, free-
            market, democratic system will continue to make the dollar among the most desirable asset
            classes in the world. But perhaps the real question is whether America will remain a free, open
            and democratic society in an environment of lower economic growth and expectations. After
            seven decades of using debt and inflation to pull future jobs and growth into the present, the
            prospect of less opportunity raises the specter of domestic political turmoil in the United States
            and other nations. Internationally, the result could be turmoil and war . This is not merely a short-run political
            challenge for Washington but ultimately threatens to challenge the self-image of American society. How will Americans react to seeing their children facing declining
            prospects for employment and home ownership?

            That in turn raises a question of whether declining living standards in the United States could eventually force a geopolitical
            withdrawal by Americans from the world stage. Allied nations from the UK to Israel to South Korea and
            Japan may soon see an end to unconditional American military and economic support.




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                                            IMPACT INTERNAL – OIL SHOCKS

   Dollar decline increases the price of oil, causing oil shocks

New Straits Times (Malaysia), 7-1-2008 [“Bringing an end to global hegemony,” Lexis]

           ONE of the most significant trends in the global economy in recent years has been the decline of the US dollar. It is
           a trend that has far-reaching consequences for all the inhabitants of this planet.
           It is partly because the US dollar has declined so much in value since 2003 that the price of oil - a lot of
           the oil trade is denominated in the dollar - has shot up. According to an analyst, "against a basket of currencies, the
           dollar has fallen by 25 per cent since 2003, and considerably more since its peak in 2001". What this means is that the
           dollar value of a barrel of oil today is much more than it was five years ago. Of course, there are other reasons why the price
           of oil is escalating.
           Since oil is the lifeblood of contemporary civilisation, the steep price hike has impacted upon all areas of life. With the higher
           cost of living, not only the poor but even those who are at the lower echelons of the middle class are struggling to make
           ends meet. The increase in food prices on a global scale, for instance, is linked to oil. The rising costs of both food
           and oil, it has to be reiterated, are directly connected to the decline of the dollar.




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                                                 2NC – ECONOMY

   1. We are on the brink – further dollar depreciation blocks economy recovery. Turns Econ
      advantage.

Shin Jang-sup, October 22, 2010 [Professor at National University of Singapore, Korea Times “Debt relief for US is
the answer, not FX war” Lexis]

           This is mainly due to the fact that American households are struggling with debt burdens and are
           unable to increase spending. U.S. banks, sitting on three trillion dollars of excess reserves, are
           hard to find good borrowers and they are even calling on loans from existing ones to shore up
           their own balance sheets. Companies also find it hard to sell their products in the domestic
           market and cannot increase employment.

           Meanwhile, liquidity released by the Fed are leaking outside and creating huge volatilities around
           the world. Financial institutions and investors are anxious to find lending and investment
           opportunities abroad especially in emerging markets, prompting upward pressure on their
           currencies. The Australian dollar is now trading at near par value with the U.S. dollar. Brazil has
           increased its financial transaction tax rate to 4 percent in an effort to stem sudden inflows of foreign
           money. China is resisting a sharp adjustment of the yuan but is pressured hard by the U.S. and
           Eurozone countries to drop its ¡®currency manipulations.'

           If the current 'currency war' intensifies, there are more things to lose than to gain. The perceived
           gains by the U.S. may not be that great. Exports only account for about 7.5 percent of its gross
           domestic products and it is a long way to go before a depreciation of U.S. dollars will boost its
           export competitiveness and therefore increase domestic employment. In the short run, it is
           instead possible that a cheaper U.S. dollar would increase import prices and further constrain
           domestic consumption. Moreover, if long-term interest rates rise due to a weak dollar, the whole
           financing scheme for economic recovery would become very difficult to function.

   2. Dollar depreciation would bring down the world economy

e-Watchman 7 (“The End of Money”, 6-22, http://e-watchman.co.uk/index.php?p=50&more=1&c=1&tb=1&pb=1)

That is the exact same scenario that sent the Reichsmark up in flames – only this time the situation is not confined to a
single nation. It is global.The truth is that because the U.S. Dollar is the world’s reserve currency and many nations
hold trillions in dollar-denominated debt, like U.S. treasury notes, a significant collapse of the Dollar will bring the
entire system down. Presently the holders of U.S. dollars, such as the secretive sovereign wealth funds, are quietly
looking for ways to unload them before they are stuck holding worthless paper.


   3. Global War – Mead (In Your Starter Pack)




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                                                                 2NC – FOOD PRICES

   Dollar collapse results in food scarcity, food price increases

        FTM by Eric Hammer | FTMDaily Contributing Writer Dailyhttp://ftmdaily.com/currency-wars/7-economic-consequences-of-a-dollar-collapse/ “7 Economic
        Consequences of a Dollar Collapse” MARCH 23, 20 11


            Given the Federal Reserve’s penchant for simply printing more money whenever there is a need
            to borrow additional cash, the value of the dollar once it has been removed as the world’s
            reserve currency would plummet dramatically against other world currencies. This would have a
            number of effects on the American economy and way of life.1) Bank run . The first thing that is
            likely to happen in such an event is that there will be a bank run, as there was after the stock market crash in 1929. With
            dollars suddenly falling rapidly in value, people will try to withdraw their money and change it to something else quickly before it becomes worthless. 2)

             Capital controls . Next, the government would pass laws to restrict the ability of private citizens to
            convert their dollars into foreign currencies. This would be done in order to “protect” the dollar so that it doesn’t fall any further. 3)
             Rising unemployment . Unfortunately, because we live in a globalized economy, protecting the dollar in
            this way could lead to severe problems at home. Unemployment could rise dramatically as
            manufacturers find it impossible to purchase needed parts from other parts of the world, which
            would be prohibitively expensive. 4) Soaring consumer prices. Similarly, retail sales would suffer as
            imported goods become pricier. 5) Food scarcity . Scarce food supplies could set in as well
            because the cost of purchasing food is tied in large part to the price of oil, which would now
            have to be purchased with expensive foreign currency. 6) Public riots . In extreme cases, rioting could
            ensue and martial law could be imposed in order to restore order. 7 ) Increased tourism and
             exports . On the good side, foreign tourism would likely boom and production of “Made in America”
            products could increase dramatically as long as the raw materials are all locally sourced since
            American products would now be considered bargains by the rest of the world.


   Prices spikes kill billions and cause global war

Brown 7 (Lester R., Director – Earth Policy Institute, 3-21, http://www.earth-policy.org/Updates/2007/Update65.htm)

            Urban food protests in response to rising food prices in low and middle income countries, such as
            Mexico, could lead to political instability that would add to the growing list of failed and failing states. At some
            point, spreading political instability could disrupt global economic progress. Against this backdrop,
            Washington is consumed with “ethanol euphoria.” President Bush in his State of the Union address set a production goal for
            2017 of 35 billion gallons of alternative fuels, including grain-based and cellulosic ethanol, and liquefied coal. Given the
            current difficulties in producing cellulosic ethanol at a competitive cost and given the mounting public opposition to liquefied
            coal, which is far more carbon-intensive than gasoline, most of the fuel to meet this goal might well have to come from grain.
            This could take most of the U.S. grain harvest, leaving little grain to meet U.S. needs, much less those of the hundred or so
            countries that import grain. The stage is now set for direct competition for grain between the 800
            million people who own automobiles, and the world’s 2 billion poorest people. The risk is that
            millions of those on the lower rungs of the global economic ladder will start falling off as higher
            food prices drop their consumption below the survival level.




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                                                     IMPACT – FOOD PRICES

      Even without escalation, half the planet dies

Brown 5 (Lester, President of Earth Policy Institute, MPA – Harvard, Former Advisor to the Secretary of Agriculture,
Outgrowing The Earth, http://www.earth-policy.org/Books/Out/)

             “Many Americans see terrorism as the principal threat to security,” said Brown, “but for much of humanity, the effect of water
             shortages and rising temperatures on food security are far more important issues. For the 3 billion people who live
             on 2 dollars a day or less and who spend up to 70 percent of their income on food, even a
             modest rise in food prices can quickly become life-threatening. For them, it is the next meal that is the
             overriding concern.”




      And --- food conflicts go global --- triggers World War 3

Calvin 98 (William, Theoretical Neurophysiologist – U Washington, Atlantic Monthly, January, Vol 281, No. 1, p. 47-
64)

             The population-crash scenario is surely the most appalling. Plummeting crop yields would cause some
             powerful countries to try to take over their neighbors or distant lands -- if only because their armies,
             unpaid and lacking food, would go marauding, both at home and across the borders. The better-organized
             countries would attempt to use their armies, before they fell apart entirely, to take over countries with
             significant remaining resources, driving out or starving their inhabitants if not using modern weapons to accomplish
             the same end: eliminating competitors for the remaining food. This would be a worldwide problem -- and could
             lead to a Third World War -- but Europe's vulnerability is particularly easy to analyze. The last abrupt cooling, the
             Younger Dryas, drastically altered Europe's climate as far east as Ukraine. Present-day Europe has more than 650 million
             people. It has excellent soils, and largely grows its own food. It could no longer do so if it lost the extra warming from the
             North Atlantic.




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                                                             HEG IMPACTS

   End of US Heg causes global nuclear war

Arbatov 7 (Alexei, Member – Russian Academy of Sciences and Editor – Russia in Global Affairs, “Is a New Cold
War Imminent?”, Russia in Global Affairs, 5(3), July / September, http://eng.globalaffairs.ru/numbers/20/1130.html)

           However, the low probability of a new Cold War and the collapse of American unipolarity (as a political doctrine, if not in
           reality) cannot be a cause for complacency. Multipolarity, existing objectively at various levels and interdependently, holds
           many difficulties and threats. For example, if the Russia-NATO confrontation persists, it can do much damage to both
           parties and international security. Or, alternatively, if Kosovo secedes from Serbia, this may provoke similar processes in
           Abkhazia, South Ossetia and Transdniestria, and involve Russia in armed conflicts with Georgia and Moldova, two countries
           that are supported by NATO. Another flash point involves Ukraine. In the event of Kiev’s sudden admission into the North
           Atlantic Alliance (recently sanctioned by the U.S. Congress), such a move may divide Ukraine and provoke mass disorders
           there, thus making it difficult for Russia and the West to refrain from interfering. Meanwhile, U.S. plans to build a missile
           defense system in Central and Eastern Europe may cause Russia to withdraw from the INF Treaty and resume programs
           for producing intermediate-range missiles. Washington may respond by deploying similar missiles in Europe, which would
           dramatically increase the vulnerability of Russia’s strategic forces and their control and warning systems. This could make
           the stage for nuclear confrontation even tenser. Other “centers of power” would immediately derive benefit from the growing
           Russia-West standoff, using it in their own interests. China would receive an opportunity to occupy even more
           advantageous positions in its economic and political relations with Russia, the U.S. and Japan, and would consolidate its
           influence in Central and South Asia and the Persian Gulf region. India, Pakistan, member countries of the Association of
           Southeast Asian Nations and some exalted regimes in Latin America would hardly miss their chance, either. A multipolar
           world that is not moving toward nuclear disarmament is a world of an expanding Nuclear Club. While Russia and the West
           continue to argue with each other, states that are capable of developing nuclear weapons of their own will jump at the
           opportunity. The probability of nuclear weapons being used in a regional conflict will increase significantly. International
           Islamic extremism and terrorism will increase dramatically; this threat represents the reverse side of globalization. The
           situation in Afghanistan, Central Asia, the Middle East, and North and East Africa will further destabilize. The wave of
           militant separatism, trans-border crime and terrorism will also infiltrate Western Europe, Russia, the U.S., and other
           countries. The surviving disarmament treaties (the Non-Proliferation Treaty, the Conventional Armed Forces in Europe
           Treaty, and the Comprehensive Nuclear Test Ban Treaty) will collapse. In a worst-case scenario, there is the chance that an
           adventuresome regime will initiate a missile launch against territories or space satellites of one or several great powers with
           a view to triggering an exchange of nuclear strikes between them. Another high probability is the threat of a terrorist act with
           the use of a nuclear device in one or several major capitals of the world.


  Global nuclear war
Auslin 9 (Michael, Resident Scholar – American Enterprise Institute, and Desmond Lachman – Resident Fellow –
American Enterprise Institute, “The Global Economy Unravels”, Forbes, 3-6, http://www.aei.org/article/100187)

           What do these trends mean in the short and medium term? The Great Depression showed how social and global chaos
           followed hard on economic collapse. The mere fact that parliaments across the globe, from America to Japan, are unable to
           make responsible, economically sound recovery plans suggests that they do not know what to do and are simply hoping for
           the least disruption. Equally worrisome is the adoption of more statist economic programs around the globe, and the
           concurrent decline of trust in free-market systems. The threat of instability is a pressing concern. China, until last year the
           world's fastest growing economy, just reported that 20 million migrant laborers lost their jobs. Even in the flush times of
           recent years, China faced upward of 70,000 labor uprisings a year. A sustained downturn poses grave and possibly
           immediate threats to Chinese internal stability. The regime in Beijing may be faced with a choice of repressing its own
           people or diverting their energies outward, leading to conflict with China's neighbors. Russia, an oil state completely
           dependent on energy sales, has had to put down riots in its Far East as well as in downtown Moscow. Vladimir Putin's rule
           has been predicated on squeezing civil liberties while providing economic largesse. If that devil's bargain falls apart, then
           wide-scale repression inside Russia, along with a continuing threatening posture toward Russia's neighbors, is likely. Even
           apparently stable societies face increasing risk and the threat of internal or possibly external conflict. As Japan's exports
           have plummeted by nearly 50%, one-third of the country's prefectures have passed emergency economic stabilization
           plans. Hundreds of thousands of temporary employees hired during the first part of this decade are being laid off. Spain's
           unemployment rate is expected to climb to nearly 20% by the end of 2010; Spanish unions are already protesting the lack of
           jobs, and the specter of violence, as occurred in the 1980s, is haunting the country. Meanwhile, in Greece, workers have
           already taken to the streets. Europe as a whole will face dangerously increasing tensions between native citizens and
           immigrants, largely from poorer Muslim nations, who have increased the labor pool in the past several decades. Spain has
           absorbed five million immigrants since 1999, while nearly 9% of Germany's residents have foreign citizenship, including
           almost 2 million Turks. The xenophobic labor strikes in the U.K. do not bode well for the rest of Europe. A prolonged global
           downturn, let alone a collapse, would dramatically raise tensions inside these countries. Couple that with possible
           protectionist legislation in the United States, unresolved ethnic and territorial disputes in all regions of the globe and a loss
           of confidence that world leaders actually know what they are doing. The result may be a series of small explosions that
           coalesce into a big bang.




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           IMPACT INTERNAL – CHINA

   Dollar depreciation decreases China’s net exports, risks “turning point” in Chinese foreign
   trade – China’s reaction to subprime loan crisis proves
          Bejing Review, “Fit and Trim,” March 20 2008 (http://www.bjreview.com/business/txt2008-
           03/20/content_106092.htm)

           Subprime bust, caution … "Strong Chinese exports are now influenced by the subprime mortgage crisis in the United
           States," said Ha Jiming, chief economist of China International Capital Corp. Ltd. According to Ha, because of the
           economic recession in the United States, U.S. domestic consumption has slackened. Since October
           2007, the growth of China's exports to the United States has decreased, sliding from 11.9 percent in
           November to 6.8 percent in December, 5.3 percent in January this year, and finally a negative 5.3 percent in February. "This
           indicates that the slowdown of the U.S. economy is affecting China's exports," Ha continued. The
           influences of the subprime mortgage crisis are not limited to the United States. Over time , the U.S. economic
           recession will have greater impacts on other economies and further influence China's exports. In
           fact, indications can be seen from the sharp drop of growth of China's exports to its major trading partners in February.
           During this month, growth of China's exports to the EU and Japan stood at 1.2 percent and 2.7 percent, respectively, which
           were 32.1 percentage points and 10.5 percentage points lower than the rates in January. Growth of China's exports to India,
           Russia and Brazil came to 28 percent, 28.4 percent and 45.1 percent, respectively, down 34.7 percentage points, 37.8
           percentage points and 38.9 percentage points over January. Growth of exports to these countries is influenced by the
           subprime mortgage crisis to some extent. "The depreciation of the U.S. dollar leads to the over-valuation
           of dollar-nominated Chinese exports," said Yang Fan, a researcher at the Institute of Economics of the Chinese
           Academy of Social Sciences. "Deducting exchange rate factors, China's exports to Europe, the United
           States and Japan were decreasing. Risks of export decline must be watched closely." No turning
           point Increased growth rates for imports and decreased growth rates for exports have led to a
           narrowing trade surplus. Because of this, some people contend that there will be a "turning
           point" for the trend of Chinese foreign trade.




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                                   AFF ANSWERS – CONFIDENCE LOW

   Confidence Low – Global Recession looms on the horizon

C Rangarajan & Michael Debabrata Patra 3-16-2012 [Economic & Political Weekly, “Can the SDR become a
Global Reserve Currency? Lexis]

           Over recent months and weeks, global economic prospects have worsened rapidly. A large loss
           of confidence hangs over the outlook for advanced economies. This portends a high risk of the
           global economy slipping back into recession at a time when policymakers have demonstrated that
           they may be ill-equipped to fight it. Growth across close to half of the global economy comprising
           the European Union (EU), the US and Japan has stalled or turned down. A dangerous dynamic is
           taking hold - the debt crisis in Europe is creating new risks for the US economy; the possibility
           of another US recession worsening the European social crisis even further. In the emerging and
           developing world, overheating pressures have necessitated countervailing policy action that is
           causing growth to slow.




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                                         AFF ANSWERS – PLAN K DEFICIT REDUCTION

   Transportation investment is a component of deficit-reduction

ENO Center for Transportation 5-15-12 [non-partisan think-tank on transportation, “Transportation Investment as
Part of a Deficit-Reduction Package,” http://www.infrastructureusa.org/transportation-investment-as-part-of-a-deficit-
reduction-package/]

           The need to cut our national debt and annual budget deficits is likely to be a force in policy considerations for many years to come. The
           Congressional Budget Office’s January 2012 Budget and Economic Outlook projects a $1.1 trillion federal budget deficit for fiscal year 2012, assuming current laws
           remain unchanged. In recent years the federal government has posted record deficits, with the deficit’s share of the gross domestic product the highest since World
                                               is likely to be increasing pressure on Congress and the President to
           War II. As the economy slowly recovers, there
           tackle the growing levels of debt. At the same time our national transportation infrastructure is in need
           of substantial investment. The backbone of the surface transportation network, the Interstate Highway
           System, is reaching the end of its useful life and much of it will have to be reconstructed in the next decade.
           According to the American Society of Civil Engineers, more than 26 percent of our nation’s bridges are structurally deficient
           or functionally obsolete. Our Air Traffic Control system is reliant on technologies and polices developed over 60 years ago.
           And while gas prices are rising and more American are seeking alternative modes of transport, our mass transit and
           intercity rail systems are struggling to keep a state of good repair, let alone expand to meet the needs of the future.
           Federal transportation programs are caught in the middle of these two issues. For the first time in decades, both decreasing
           revenues and increasing demands are straining existing funding structures. Recent attempts in Congress to raise revenues for the existing transportation programs
           have been desperate attempts to find outside offsets, with no appetite to increase existing taxes and fees. It appears that the current debt crisis will linger for years
           while the United States works to repay its debts in a slow economic recovery, limiting government resources in all areas. On the other hand,
           transportation investment can be considered as a component of reducing the national debt –
           effective spending on transportation can provide short-term job creation and long-term
           economic growth, which in turn produces greater tax revenues and reduces future investment
           needs. In order to position itself effectively for increased funding from the federal government in this fiscal environment, the transportation community needs to
           make the case for investment within the greater context of deficit reduction. In order to shape and contribute to this conversation, the Eno Center for Transportation
           held its 2011 Policy Forum titled Transportation Investment as Part of a Deficit-Reduction Package on November 16, 2011, at George Mason University in Arlington,
           Va. The forum convened expert panelists in the transportation field in a series of interactive sessions with forum attendees. This paper summarizes the context of the
           federal deficit, the existing funding structures for the federal programs, and the key points and lessons learned from the Policy Forum by drawing from the experience
           and insights of panelists and other resources.




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                               AFF ANSWERS – DEFICIT SPENDING GOOD

   Deficit spending on infrastructure creates increased investment and causes economic growth

Mark Thoma, 5-22-2011 [Mark Thoma is a macroeconomist and time-series econometrician at the University of
Oregon. His research focuses on how monetary policy affects the economy, and he has also worked on political
business cycle models. Mark is currently a fellow at The Century Foundation. CBS Money Watch, “Government
Deficits: The Good, The Bad, and the Ugly,” http://www.cbsnews.com/8301-505123_162-39741324/government-
deficits-the-good-the-bad-and-the-ugly/]

The first thing to recognize is that deficits are not always bad. When the economy goes into recession, deficit
spending through tax cuts or the purchase of goods and services by the government can stop the downward spiral
and help to turn the economy back around. Thus, deficits can help us to stabilize the economy. In addition, as the
economy improves due to the deficit spending the outlook for businesses also improves, and this can lead to
increased investment, an effect known as crowding in. Deficits also allow us to purchase infrastructure and spread
the bills across time similar to the way households finance the purchase of a car or house, or the way local
governments finance schools with bond issues. This allows us t o purchase infrastructure that we might not be able to
afford if it had to be financed all at once (this can also force future generations who benefit from the spending to share
the construction costs). Finally, deficits can be used to finance wars, but whether this is a good or a bad depends upon
your view of whether the war is just. So let's turn to the bad next.


   Deficit Spending stabilizes the economy and stimulates investment during a recession

Mark Thoma, 5-22-2011 [Mark Thoma is a macroeconomist and time-series econometrician at the University of
Oregon. His research focuses on how monetary policy affects the economy, and he has also worked on political
business cycle models. Mark is currently a fellow at The Century Foundation. CBS Money Watch, “Government
Deficits: The Good, The Bad, and the Ugly,” http://www.cbsnews.com/8301-505123_162-39741324/government-
deficits-the-good-the-bad-and-the-ugly/]

Which of these concerns is most important? Notice that in the short-run, the consequences of deficits are mostly
positive when the economy is in a recession. Deficits allow us to stabilize the economy (though it's important we pay
the bills when times get better), deficit spending can stimulate investment through crowding in, and there's little
 danger that the spending will drive up interest rates or be inflationary due to the large amount of slack in the
economy.

But in the longer run deficits are mostly problematic. As the economy nears full employment deficits can lead to higher
interest rates, crowding out, less investment, and slower growth. Inflation can also be a problem, and if the debt
burden gets bad enough, outright default is a possibility.

That's why economists who have supported the use of monetary and fiscal policy to ease the effects of the recession
are recommending that we continue the stimulus for now , or at least that we don't make things worse by reducing
spending or raising taxes before the economy is on better footing. We do have a deficit problem, and it must be
addressed over the medium and longer term in order to avoid the negative effects described above. But reducing the
deficit before the economy is on solid footing can be counterproductive ?€" it could slow the recovery or even cause
a setback.

If we are smart ?€" if we continue to help the economy now and implement a credible deficit reduction strategy over
the longer term ?€" the good can triumph over the bad and the ugly. Unfortunately, the way things look presently, with
the deficit hawks demanding immediate action to stave off invisible bond vigilantes, and the inflation hawks pushing for
interest rate increases to keep the invisible inflation fairies at bay, there's no guarantee that good will prevail.




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                                   AFF ANSWERS – DEFICIT SPENDING GOOD

   Plan causes crowding-in, not crowding out. Deficit spending in times of crisis call for stimulus
   that increases consumer demand.

Baumol & Blinder 2011 [William, Prof. Economics @ NYU & Princeton and super famous economist, & Alan, Prof.
Economics @ Princeton and super famous economist, Economics: Principles & Policy, found at “Crowding-Out and
Crowding-In,” Economist’s View, http://economistsview.typepad.com/economistsview/2008/12/crowding-out-an.html]

           Furthermore, in times of economic slack, a counterforce arises that we might call the crowding-in
           effect. Deficit spending presumably quickens the pace of economic activity. That, at least, is its purpose.
           As the economy expands, businesses find it profitable to add to their capacity so as to meet the
           greater consumer demands. Because of this induced investment, as we called it in earlier chapters, any increase in
           G tends to increase investment, rather than decrease it as the crowding-out hypothesis predicts.
           The strength of the crowding-in effect depends on how much additional real GDP is stimulated
           by government spending (that is, on the size of the multiplier) and on how sensitive investment spending
           is to the improved profit opportunities that accompany rapid growth. It is even conceivable that the crowding-
           in effect can dominate the crowding-out effect in the short run, so that I rises, on balance, when G rises.
           But how can this be true in view of the crowding-out argument? Certainly, if the government borrows more and the total
           volume of private saving is fixed, then private industry must borrow less. That's just arithmetic. The fallacy in the strict
           crowding-out argument lies in supposing that the economy's flow of saving is really fixed. If
           government deficits succeed in raising output, we will have more income and therefore more
           saving. In that way, both government and industry can borrow more.
           Which effect dominates-crowding out or crowding in? Crowding out stems from the increases in interest rates caused by
           deficits, whereas crowding in derives from the faster real economic growth that deficits sometimes produce. In the short run,
           the crowding-in effect-which results from the outward shift of the aggregate demand curve-is often the more powerful,
           especially when the economy is at less than full employment.
           In the long run, however, the supply side dominates because, as we have learned, the economy's self-correcting
           mechanism pushes the growth rate of actual GDP toward the growth rate of potential GDP. With the economy
           approximately at full employment, the crowding-out effect takes over: Higher interest rates lead to less investment, so the
           capital stock and potential GDP grow more slowly. Turned on its head, this is the basic long-run argument for running
           budget surpluses: They speed up investment and growth.
           The Bottom Line
           Let us summarize what we have learned so far about the crowding-out controversy.
           • The basic argument of the crowding-out hypothesis is sound: Unless the economy produces enough additional saving,
           more government borrowing will force out some private borrowers, who are discouraged by the higher interest rates. This
           process will reduce investment spending and cancel out some of the expansionary effects of higher government spending.
           • But crowding out is rarely strong enough to cancel out the entire expansionary thrust of
           government spending. Some net stimulus to the economy remains.
           • If deficit spending induces substantial GOP growth, then the crowding-in effect will lead to more
           saving-perhaps so much more that private industry can borrow more than it did previously, despite the increase in
           government borrowing.
           • The crowding-out effect is likely to dominate in the long run or when the economy is operating near full employment. The
           crowding-in effect is likely to dominate in the short run, especially when the economy has a
           great deal of slack.
           • Surpluses have just the opposite effects. When slack exists, they are likely to slow growth by
           reducing aggregate demand. But in the long run, budget surpluses are likely to foster capital formation and speed up
           growth.




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                                AFF ANSWERS – ECON SOLVES DOLLAR

   Economy growth boosts investments and decreases fears of dollar instability. Loss of
   Hegemony will be long-term.

Catarina Saraiva, Nov 21, 2011 [“Dollar Status Grows,” Treasury & Risk & TRBreakingNews]

           Faster growth may boost investor appetite for riskier assets, decreasing demand for the dollar's
           safety, said Lane Newman, director of foreign exchange at ING Groep NV in New York. "This is
           perhaps a temporary respite from the dollar losing its reserve status," he said. "I see this as a
           decades- long trend. Ultimately, it's the devaluation and the end of the hegemony of the big dollar."

           The dollar has been the world's reserve currency since World War II, when the U.S. and allies
           agreed at the 1944 Bretton Woods conference to peg it to a rate of $35 per ounce of gold. After
           global currencies began freely floating in 1973, it has remained the most-traded legal tender,
           accounting for 85 percent of the $4 trillion per day foreign exchange market, according to the BIS.




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                                    AFF ANSWERS – NO DOLLAR COLLAPSE

   Nothing will tank the dollar – no alternative currency

Catarina Saraiva, Nov 21, 2011 [“Dollar Status Grows,” Treasury & Risk & TRBreakingNews]

           A budget deficit of more than $1 trillion, a deadlock among Congressional supercommittee
           members on spending cuts and 9 percent unemployment haven't deterred investors from
           seeking safety in the world's biggest economy. The euro has been undermined by the region's
           sovereign debt crisis, while the Swiss franc and yen have fallen as their governments buy billions of
           dollars to weaken them.

           "There's not anything close to a substitute and part of it is the deepness of the market, the
           liquidity," Jack McIntyre, a fund manager who oversees $23 billion in debt at Brandywine Global
           Investment Management, a unit of Legg Mason Inc., said Nov. 15 in a telephone interview from
           Philadelphia. "There's a perception, right or wrong, that we're going to make good on all of our
           assets."

   No dollar collapse. No alternative currency. China can’t compete.


Financial Adviser, 12-13-2007 [“Death of the dollar rumours exaggerated]

           The yuan is a story for the future. Yes, China's role in the global trading system is becoming increasingly important, but
           the yuan currently does not have the other necessary attributes of a global reserve currency. Such a
           currency requires a well-developed financial system; a significant degree of external confidence
           in the currency as a store of value; and finally, political stability - who knows what China's political future
           might be.

   No dollar collapse – strong inertial bias against divestment.

Financial Adviser, 12-13-2007 [“Death of the dollar rumours exaggerated]

           In the context of currency denomination, an individual trader would have very little incentive to
           leave the dollar regime unless every other trader decided to do so at the same time. Hence there
           exists a strong inertial bias to keep the incumbent currency as the vehicle, even if another
           currency should come along that can play the role just as well, just as there is a bias towards
           keeping Microsoft Windows.
           Perhaps the more compelling argument for the euro is its attraction as a store of value. As noted
           above, the dollar has lost over a quarter of its real value in the past half-decade, while the euro
           has gained by a similar amount, as this week's chart shows. But this is only a necessary condition
           for regicide. It is not sufficient. The dollar eventually replaced sterling not because sterling's value
           kept falling, but because the fundamentals underpinning sterling's value weakened, namely
           Britain's Empire and the strength of its underlying economy. As Britain's importance in the global
           system waned so too did the demand for its currency.
           So unless the fundamentals underpinning the US economy weaken markedly - its higher rate of
           productivity growth, its pre-eminent financial system and the liquidity of the dollar-based system,
           will mean that it is very likely to remain as the world's reserve currency.
           Finally, would you sell an asset that has already fallen for five straight years in order to buy one
           that has already reached a record high? If not then we can conclude by misquoting Mark Twain:
           "Rumours of the dollar's death seem greatly exaggerated".




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                                 AFF ANSWERS – NO DOLLAR COLLAPSE

   No connection between deficit and reserve currency status. The dollar will remain strong for
   years. Any transition in the dollar’s status is inevitable.

C Rangarajan & Michael Debabrata Patra 3-16-2012 [Economic & Political Weekly, “Can the SDR become a
Global Reserve Currency? Lexis]

Despite shocks and sometimes acute differences in view on the US dollar, the current system has been resilient
over decades. Arguments continue to be made that there is no necessary connection between US deficits and
reserve accumulation, and that relatively favourable demographic trends in the US and the likely persistence of high
savings in emerging markets are consistent with sustainable growth (Truman 2009, 2010; Cooper 2008). As global
demand for reserve assets grows in relation to the US economy, a more acute trade-off between domestic priorities
and international monetary stability is conceivable. Yet, in the near future, factors such as inertia in currency use, the
large size and relative stability of the US economy, and the dollar pricing of oil and other commodities will help
perpetuate the dollar's role as the dominant medium for international transactions. The hard facts predicate this
 outcome. The US dollar is a major form of cash currency around the world. Roughly 75% of 100 dollar notes, 55%
of 50 dollar notes, and 60% of 20 dollar notes are held abroad, while about 65% of all US banknotes are in circulation
outside the country (Goldberg 2010). In 2010, eight countries used the US dollar as legal tender, nine countries has
currency board using the US dollar, 15 had conventional pegs against the US dollar, 12 had exchange rate
arrangements that stabilised their currencies against the US dollar, two had crawling pegs, two had crawl-like pegs
and three other managed arrangements linked to the US dollar (IMF 2010b). A shift away from dollar assets, including
Treasury securities, could be a concern for the US if divestiture triggers higher funding costs. However, such a drastic
outcome appears unlikely.
The future of the dollar in this context continues to be the subject of discussion and policy statements, but the
currency's status has been maintained and is likely to remain so for some more years. As the size and structure of
the global economy change, international currency use may change as well, and the currency's pre-eminence could
diminish in the future. Indeed, historical precedent exists for the rise and fall of the international status of currencies.
The question is not "if" but "when". Accordingly, it seems important in the context of global stability to monitor the role
of the US dollar in international economic activity and to understand the potential causes and consequences of the
dollar's changing international role.




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                                           AFF ANSWERS – DIVESTMENT NOW

   BRICS threatening to divest from dollar – challenging reserve currency

Indo-Asian News Service, 3-29-2012 [“BRICS to set up joint bank, backs dialogue on Iran, Syria (Roundup),”
Lexis]

           In an important step, the BRICS decided to create its first institution in the form of a South South
           Development Bank that will mobilise "resources for infrastructure and sustainable development projects in BRICS and
           other emerging economies and developing countries", the BRICS' Delhi Declaration said.
           The leaders directed their finance ministers "to examine the feasibility and viability of such an initiative, set up a joint
           working group for further study and report back by the next summit".
           The development banks of the five countries signed two pacts, including a master agreement on
           extending credit facility in local currency and BRICS multilateral letter of credit confirmation facility agreement,
           which could help scale up bilateral trade from $230 billion to $500 billion by 2015. The move to trade in local
           currencies could potentially challenge the supremacy of the US dollar as the world's reserve
           currency.




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                                    AFF ANSWERS – DOLLAR HEGEMONY BAD

   Dollar Hegemony sustains US primacy which represses democracy, and spreads inequity, war,
   and climate crisis.

New Straits Times (Malaysia), 7-1-2008 [“Bringing an end to global hegemony,” Lexis]

           For the US, any move by a major oil exporter to wean itself from the dollar is a direct challenge to
           its hegemonic power. Look at its continuous manoeuvres to undermine Venezuela's democratically elected president,
           after Hugo Chavez placed a portion of his country's oil trade out of the dollar's orbit. It is not difficult to fathom why the US is
           so obsessed with perpetuating the oil-dollar nexus. It is partly because most of the oil trade - more than any other trade - is
           denominated in the dollar that the US currency is able to dominate the world economy. In fact, it was America's agreement
           with Saudi Arabia in 1974 that the oil trade would be denominated in the dollar which gave a huge lift to the dollar's reign.
           The US will fight tooth and nail to ensure that that reign continues.
           But the supremacy of the dollar must end if US hegemony is to end. US hegemony - like all hegemonies in
           history - has been a bane upon humanity. It has brought death and destruction to millions through
           wars and conflicts. It has widened the gap between the "have-a-lot" and the "have-a-little" across
           the globe. It has reinforced global authoritarianism and stymied the growth of global democracy
           and international law. It has given rise to antagonism and antipathy between civilisations,
           especially between the Western and Muslim worlds.
           It has denied equality and respect to civilisations and cultures outside the West. It has led to
           global environmental degradation and a global climate crisis. Global hegemony has also
           provoked a vile and vicious reaction from a fringe within the Muslim world in the form of global
           terror.
           This is why citizen groups in both the Global South and the Global North should campaign with
           greater vigour to bring global hegemony to an end by weakening the role of the dollar as the
           world's reserve currency. More oil-producing countries should be persuaded to switch from the dollar to other
           currencies. In international trade, countries should shift to other currencies which are more conducive to their short- and
           long-term interests. If foreign reserves are still in dollars, a concerted endeavour should be made to convert them into other
           currencies which will at least protect their value.




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                                            AFF ANSWERS – HEG BAD: CHINA

   US hegemony prompts Sino-US war

   Chinese ascension absent a change in American policy guarantees war
        LAYNE (Professor of Political Science @ Texas A&M) ‘07
        [Christopher, American Empire: A Debate , P. 73-74 //wyo-tjc]

            To be sure, the United States should not ignore the potential strategic rami- fications of China's arrival on the world stage as
            a great power. After all, the lesson of history is that the emergence of new great powers in the international
            system leads to conflict, not peace. On this score, the notion-propagated by Beijing-that China's will be a
            "peaceful rise" is just as fanciful as claims by American policy-makers that China has no need to build up its military
            capa- bilities because it is unthreatened by any other state. Still, this does not mean that the United States and
            China inevitably are on a collision course that will culminate in the next decade or two in a war. Whether
            Washington and Bei- jing actually come to blows, however, depends largely on what strategy the
            United States chooses to adopt toward China, because the United States has the "last clear chance" to adopt a
            grand strategy that will serve its interests in balancing Chinese power without running the risk of an armed clash with
            Beijing. If the United States continues to aim at upholding its current primacy, however, Sino-
            American conflict is virtually certain.

   Extended deterrence guarantees war with china within 10 years—Taiwan dispute
        LAYNE (Professor of Political Science @ Texas A&M) ‘07
        [Christopher, American Empire: A Debate , P. 75 //wyo-tjc]

            Finally, Taiwan is a powder-keg issue in Sino-American relations. China remains committed to
            national reunification, yet Taiwan is moving percepti- bly toward independence. Almost certainly,
            Beijing would regard a Taiwanese declaration of independence as a casus belli. It is unclear how the United States would
            respond to a China-Taiwan conflict, although President George \V Bush created a stir in 2001 when he declared that the
            United States would intervene militarily in the event of a Chinese attack on Taiwan. For sure, how- ever, it is safe to predict
            that there would be strong domestic political pressure in favor of American intervention. Beyond the arguments that Chinese
            mili- tary action against Taiwan would undermine U.S. interests in a stable world order and constitute "aggression,"
            ideological antipathy toward China and support for a democratizing Taiwan would be powerful
            incentives for Ameri- can intervention. On Taiwan, in other words, the arguments of U.S. primacists
            have come close to locking-in Washington to a potentially dangerous policy The primacists' claim
            that the United States must be prepared to defend Taiwan from Chinese invasion overlooks three points. First, for nearly a
            quar- ter century, the United States has recognized that Taiwan is a Chinese prov- ince, not an independent state. Second,
            America's European and Asian allies have no interest in picking a quarrel with China over Taiwan's fate. If Wash- ington
            goes to the mat with Beijing over Taiwan, it almost certainly will do so alone. (Given their unilateralist bent, however, the
            prospect of fighting China without allies might not be much concern to American primacists.) Third, by defending
            Taiwan, the United States runs the risk of armed confronta- tion with China-probably not in the
            immediate future, but almost certainly within the next decade or so.

   War with china leads to deterrence breakdowns and nuclear holocaust

        JOHNSON (author) ‘01
        [Chalmers, “Time to Bring the Troops Home”, The Nation, May 14, p. lexis // wyo-tjc]

            China is another matter. No sane figure in the Pentagon wants a war with China, and all serious US
            militarists know that China's minuscule nuclear capacity is not offensive but a deterrent against the
            overwhelming US power arrayed against it (twenty archaic Chinese warheads versus more than 7,000 US warheads).
            Taiwan, whose status constitutes the still incomplete last act of the Chinese civil war, remains the most dangerous place on
            earth. Much as the 1914 assassination of the Austrian crown prince in Sarajevo led to a war that no one wanted, a
            misstep in Taiwan by any side could bring the United States and China into a conflict that neither
            wants. Such a war would bankrupt the United States, deeply divide Japan and probably end in a Chinese victory, given
            that China is the world's most populous country and would be defending itself against a foreign aggressor. More seriously ,
            it could easily escalate into a nuclear holocaust. However, given the nationalistic challenge to
            China's sovereignty of any Taiwanese attempt to declare its independence formally, forward-
            deployed US forces on China's borders have virtually no deterrent effect.




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                                                  A/T: HEG GOOD

   Heg doesn’t prevent conflict

Crawford 3 (Timothy W., Professor of Political Science – Boston College, Pivotal Deterrence: Third-Party Statecraft
and the Pursuit of Peace, p. 209-210)

Forward Engagement, Global Leadership, and U.S. Pivotal Deterrence
As the preponderant power in a globalized and interdependent world, the United States—so we are told—must
embrace "forward engagement" and "global leadership." Depending on one's preferred partisan formula, it must either
"address problems early before they become crises," or "shape circumstances before crises emerge."9 In these
slogans there is a strong whiff of an enduring nostrum. As an early twentieth century writer put it, "the secret of foreign
policy" is that "a nation cannot be merely pas-sive ... a nation should in every line take the most vigorous initiative."10
Or, as President George W. Bush put it in September 2002, "In the world that we have entered, the only path to peace
and security is the path of ac-tion."11 Those who trumpet such an activist posture tend only to see peaceful
consequences resulting from forward engagement. For them "American power is now the linchpin of stability in every
region, from Europe to Asia to the Persian Gulf to Latin America."12 They rarely concede that the strong prospect of
U.S. involvement in regional conflicts may not always cause sta-bility but instead cause instability. But the incentives
(if not the underlying motives) that lead some to aggress will often be shaped by optimism about outside
involvement.13 We should not assume that the forces of globaliza-tion that justify U.S. activism and incline the
international community toward intervention do not also play into the strategies of regional adver-saries. It is naive to
think that they, with survival at stake, do not gird for war keenly aware of the opportunities as well as dangers posed
by inter-vention by the United States or other outside actors. T here is thus no reason to assume that forward U.S.
engagement will re-inforce regional stability and promote peaceful change. Because the United States may
significantly influence the outcome of many conflicts, that po-tential must be seen for what it is; something that, by
looming so large, may encourage as well discourage revisionism. If the massive risks of running afoul of U.S. power
are a deterrent "shaping" the intentions of some re-gional antagonists, the potential windfall of securing U.S. support
will shape the intentions of others. Because the benefits of enlisting U.S. support in a war may be enormous, even the
slim chance of doing so may goad a party to act provocatively, become inflexible in negotiations, or otherwise do
things that make war likely. In sum, forward U.S. engagement may fuel disintegrative as well as integrative tendencies
in world politics and "jiggle loose" as many deadly conflicts as it knits back together.




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                                                         A/T: FOOD PRICES

   Market reactions solve – production will increase to meet demand

Khosla 7 (Vinod, Founder – Sun Microsystems and Khosla Ventures, “Food versus Fuel” or the “Salve for Africa”?,
http://www.khoslaventures.com/presentations/FOODvFUEL.pdf)

           Markets have already reacted to the higher-corn demand with increases supply, which have
           already dropped prices to about $3.50 per bushel. The ProExporter Network’s data shows us that while total
           corn demand in 2007/08 is estimated to be approximately 900 million bushels higher than 2006/07,
           total supply will increase by a 1.6 billion bushels (sufficient for about 4.8 billion gallons of ethanol or a big
           proportion of 2007 production!).12

   -- Billions won’t die – their data is wrong

Khosla 7 (Vinod, Founder – Sun Microsystems and Khosla Ventures, “Food versus Fuel” or the “Salve for Africa”?,
http://www.khoslaventures.com/presentations/FOODvFUEL.pdf)

           Stopping bad policy is a worthwhile goal, but we should not abandon all biofuels. There is no doubt that we can produce
           biofuels in the right or wrong way. However, at each step, we need to evaluate the costs of biofuels vs. the long-term costs
           of continuing with our current path. There exists vast tracts of underutilized pastureland worldwide and good energy crop
           practices can improve the sustainability of farming while meeting our energy needs. Lester Brown’s assertions that
           food supplies are likely to be threatened by corn ethanol (800M motorists vs. 2 billion poor people) is
           illogical and ill-thought out – the data is extrapolated from corn ethanol projections (without a
           basic understanding that cellulosic, and not corn ethanol, is the long term future) is flawed at best.
           To repeat what we have cited before: taking this “logic” to Brown’s idealistic vision of wind power – it would be akin to
           extrapolating to “if we produced all our electricity with wind 75% of the planet would be without electricity 75% of the time (or
           worse!)”. Irrational, fear-mongering extrapolation of data leads to irrational results.




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                                     A/T: ECONOMIC DECLINE  WAR

  Economic decline doesn’t cause war
Ferguson 6 (Niall, Professor of History – Harvard University, Foreign Affairs, 85(5), September / October, Lexis)

Nor can economic crises explain the bloodshed. What may be the most familiar causal chain in modern
historiography links the Great Depression to the rise of fascism and the outbreak of World War II. But that simple story
leaves too much out. Nazi Germany started the war in Europe only after its economy had recovered. Not all the
countries affected by the Great Depression were taken over by fascist regimes, nor did all such regimes start wars of
aggression. In fact, no general relationship between economics and conflict is discernible for the century as a whole.
Some wars came after periods of growth, others were the causes rather than the consequences of economic
catastrophe, and some severe economic crises were not followed by wars.

   U.S. isn’t key to the global economy

ML 6 (Merrill Lynch, “US Downturn Won’t Derail World Economy”, 9-18,
http://www.ml.com/index.asp?id=7695_7696_8149_63464_70786_71164)

A sharp slowdown in the U.S. economy in 2007 is unlikely to drag the rest of the global economy down with it,
according to a research report by Merrill Lynch’s (NYSE: MER) global economic team. The good news is that there are
strong sources of growth outside the U.S. that should prove resilient to a consumer-led U.S. slowdown. Merrill
Lynch economists expect U.S. GDP growth to slow to 1.9 percent in 2007 from 3.4 percent in 2006, but non-U.S.
growth to decline by only half a percent (5.2 percent versus 5.7 percent). Behind this decoupling is higher non-U.S.
domestic demand, a rise in intraregional trade and supportive macroeconomic policies in many of the world’s
economies. Although some countries appear very vulnerable to a U.S. slowdown, one in five is actually on course for
faster GDP growth in 2007. Asia, Japan and India appear well placed to decouple from the United States, though
Taiwan, Hong Kong and Singapore are more likely to be impacted. European countries could feel the pinch, but rising
domestic demand in the core countries should help the region weather the storm much better than in previous U.S.
downturns. In the Americas, Canada will probably be hit, but Brazil is set to decouple.




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