Cowardly Old World


[ In today’s guest commentary, Rick’s Picks forum regular Doug Graham sounds a note of deep despair over the political economy.  There are too many incentives, he says, for our corrupt and deeply dysfunctional system to stay just the way it is.  And even if we possessed the fortitude and resolve to put things back on track, the looming inflation of the dollar to the point of worthlessness will render any such efforts moot. RA ]

Pretty weird having front row seats to the destruction of the dollar, but here we are.  The leaders keep claiming they have a strong-dollar policy, yet the price of nearly everything, excepting housing and perpetually deflating technology, is now rising.  Every metal.  Grains?  Fuggeddaboutit. Energy?  Well natgas kind of threw us a curve, but even it is double its price from ten years ago.  We can argue the deflation debate forever, but the fact is your dollar buys you less of nearly every single commodity than it did in the Nineties.  Some, as much as 80 percent less.  You could not say this in the Eighties or the Nineties.

At the same time we have a government which evidently can do nothing but stimulate inflation, insisting on growing.  It is widely stated that governments produce nothing.   This is not entirely true.  Other than dollars, they also can produce national security and they do provide some services such as moving mail around.  In general, however, they do produce nothing.  If they were a part of the human anatomy, they are more like the colon (my apologies to the colon, an effective and efficient organ)  than the quadricep: vital for the whole to function, but not all that pleasant.   And yet, the only significant job-growth sector of the economy in the last two years has been government.

Mussolini's election results in April 1945, only after all was lost.  II Duce was caught and hanged by private citizens-no congressional testimony, Franklin Raines/Angelo Mozilo slap-on-the-wrist nonsense.

So our currency is losing value, our tax obligations are increasing, and nearly every economic indicator shows the barometer dropping and bad weather continuing.  I “Fear The Beard, and I’m not talking about S.F. Giants pitcher Brian Wilson.  I fear BS Bernanke and his beard.  He was the one who, a year-and-a-half ago, said “green shoots” were popping up everywhere.  He was the one who said in 2006 that subprime was contained and housing, nationwide, would never go down.  Fear the Beard!  The Beard who said this:  “The U.S. government has a technology, called a printing press, that allows it to produce as many dollars as it wishes at essentially no cost.” And this:  “Under a paper-money system, a determined government can always generate higher spending and, hence, positive inflation.”

Hang ‘Em High?

I believe the nasty stuff hasn’t even hit the fan yet.  But it is coming, and nothing will stop it. And when it does, all wrongs will be righted.  It will be an economic “Control-Alt-Delete,” power-on reset.    The system will have to be completely rebuilt and re-booted. It is a mess.  So obviously, we all recognize the mess and want to clean it up, right?  Throw the bums out?  Renegotiate untenable pensions?   Hang ‘em high? (See picture above.)

Will we correct what needs correcting? I doubt we grow a conscience and the will necessary – at least not until the allied forces overcome those benefiting from the fascism/ corporatism/ corrupitalism.  Call it whatever you want, but if you are getting a lot more out of the system than you put in, you are a beneficiary, and you are the problem. This spans from CEOs (not all), and from the poor (not all)  gaming the welfare system, to public servants gaming their benefits (sometimes voluntarily, sometimes systemically), and likely a very varied list of others.

I heard a campaign ad before the election disparaging a candidate because he “wanted a smaller, responsible government” and that would be destructive to the local economy….sigh!

Fat Cats Won’t Change

Will the nation have the equivalent of a big family meeting and hammer out a workable solution, or will we dig in our heels and accept an impasse that yields no real solution and the problems continue until they can’t? I am arguing that it will be the latter. Fat cats won’t change the system for obvious reasons. The non-elite and poor feel entitled, and one need only watch the perpetual re-election of Maxine Waters to understand this nonsense.  They just don’t get it. (Please YouTube obscene Maxine and her woeful defense of Fannie Mae and Franklin Raines….keep a bedpan close, though — you may hurl.)

The public servants can’t change their position because they are completely committed to defend the perverted accounting of their entitlement. (Please, do your own math, add up your contribution to your retirement, add up the total payout and tell me without snickering that it is fair to the taxpayer).  The public servant must keep the Ponzi going (even though they are effectively stealing from their heirs).  The politicians cower before the 30 million (or so) public servants because they are so well organized and vote in a block.  It is a political phalanx. You could never get all these folks in a room because they are so disparate, for one, but  they also have such different agendas.  Hence, nothing will change until it must.

No Risk-Takers=No Recovery

Coincident with this systemic apathy for effective change is a recognition by the quadricep, aka the private sector, that unless you are getting some of the largesse through government purchases or have invented new, cheap energy, taking business risk is insane.  Hence, tax receipts will continue to struggle. So there will be very little recovery.  The dollar will continue to lose value because those benefiting from the corruption will continue to increase the liabilities, while those capable of increasing tax receipts will hibernate and hibernate tax receipts with them.  It will continue until it can’t.  It will be like the scene from Downfall (that has had a thousand parodies.)

Replace Hitler with BS Bernanke and fill in the sub-titles: “Vut do you mean, I can’t simply stimulate by dropping dollars from helicopters?  Inconceivable!  It vill verk!  My doctoral thesis proved this!” Nothing will likely change our direction because too many people benefit from our corrupt and perverted system.  Spare me the argument that it is not corrupt.  The S&L crisis produced over a thousand jail sentences, and we haven’t even had an indictment.   The S&L crisis cost $160 billion to repair.  We passed the trillion mark a long time ago and are still speeding away.  Sigh.  The elite won’t allow justice because it would cost them dearly, and the poor won’t demand it because the elite keep providing promises for their silence.

Relief Thwarted

I am writing this prior to the elections.  Maybe a majority of our new leadership will be spun from the Ron Paul bolt of cloth.  Right.  Even if fiscally conservative folks occupy more positions in Congress and Senate, all the other players are still in place, blocking their move.  The ship is headed for an iceberg and no one can steer it away because there are so many hands holding the wheel.

The dollar is our Mussolini.  And the dollar will be hung, upside down, drained of all.  When that happens, all dollar-only denominated entitlements will be wiped out.  Those juicy pensions, the ones that are so well marbled that they seem nearly too good to be true?  Yeah, those will get neatly destroyed, too, with a hyperinflationary erasure.  Every aspect of the economy that relies solely on the benefit of the fruits of fiat currency will be corrected.  This includes many businesses, many that have miscalculated how dependent on the largesse they are.  Government will have to shrink violently.  There will be no money to pay for it, and the ruse of “we have to go deeper in debt to get out of debt” will be rejected.

And then the real drama will begin.  A nation will be full of desperate folks and a very small percentage of the elite rich.  A hobbled government eliminating services.  I have no idea how that will turn out, but I don’t think it will be neat or tidy.  I just hope the angry mob knows who to blame.

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  • Dave November 10, 2010, 5:20 am

    Those of us who read Rick’s commentaries and post comments seem to understand what’s going on well enough. I believe that Bernanke et al do also. It leaves me to wonder if this isn’t all being engineered to speed up the crash and thus re-emerge with a different system. I always thought that was Greenspan’s plan. Still do. None of them could ever admit that without being hanged.

  • JJ November 10, 2010, 3:38 am

    One kind of job we should outsource is the prisons and guards. California spent 1/3 of the total revenue on prisons. This is absurd. All violent criminals’ job term should be served outside US. Sure the human right conditions are bad in outsourced prisons but if you can’t do the jail don’t do the crime. This will save us very large sum of money. Then moving on next, the unions…

    • Mark Hurlbert November 10, 2010, 6:18 pm

      “violent criminals”

      Are you thinking of the bankers who induced fraud in mortgages?

      Or maybe this banker who nearly killed a person who was riding a bicycle, fled the scene, called Mercedes-Benz assistance to get their car fixed, and was arrested while putting the broken side mirror and bumper in the trunk.
      The banker then gets to plead to a misdemeanor.
      Victim, attorneys furious with misdemeanor deal

  • JimK November 9, 2010, 9:40 pm

    Martin Snell,

    Your ‘trading US retirees for Mexican workers’ strategy has been de-facto in place for some time now, as far as I can see, albeit heavier on the imports than the exports. I would feel more comfortable with increasing the influx if it was a population with a tradition of fighting for individual rights, and who didn’t believe that TX, NM, AZ, and CA were stolen from ‘their people’ and that one day justice will prevail with it’s rightful return. There are surprisingly many devotees to this line of thinking – listening to the radio is an eye opener, if you speak Spanish. I guess the trade idea you suggest will have to be negotiated with the Drug cartels down there…

  • warren November 9, 2010, 7:43 pm

    Nothing new……..
    Ecc 1:9

  • Rich November 9, 2010, 7:07 pm

    Aloha All
    Lord save US from another “free trade” miracle like the unfair trade agreements that exported American capital and jobs. Those that wish to reduce their living standard can move abroad instead of importing drug cartels, illegals and Walmart poverty.
    The dollar, constitutionally backed by gold, silver, (and copper with the Mint Act of 1792) is definitely not the private usury Federal Reserve Money Mirage Usury Note, which went from $20 gold to $1424 gold, a covert defacto devaluation of -98.6%.
    In other words, the 1913 Fed and IRS violated our Constitution and took over our government and citizens under the nose of another Ivy League Academic President named Woodrow Wilson, also from Princeton like BSB.
    Yes, some slight seller’s remorse as gold and silver go parabolic. Bot at $105 and $4. Oh well, can’t get too greedy. Happy Chuck and Rick making bank, bully.
    Doubt dollar is toast or tp right now or the next few years. Long term charts show a 70.70 bottom in March 2008 and a target of 115.
    USA economy still four times China’s. If we keep going down this tired old lonesome political road, China will be number one by 2050, apparently making Clintongs and Obamanations happy.
    China doubled gold reserves, now #5 in the world.
    China now owns more US debt than anyone else, although Fed overtakes that early next year.
    Cayman Islands, the new Switzerland, with a quarter of the world’s liquid assets, also own a lot of T’s. So does Paulson, who claimed sub-prime was contained, a major China player, who paid no taxes on $480 M GS stock he sold, and tricked the taxpayer into funding bailouts at par of his crony’s bad derivative gambling debts. So Taxpayers will go totally broke before Treasuries held by the Global Warming Enviro Eugenic crowd default. (They may extend maturities, pension plans or private property into Ts force majeure like Argentina, Mexico and Russia with their devaluation defaults.)
    China dollar reserves, including dollars, Treasuries and Agencies like FNM and FRM, are two-thirds of their $2.65 T reserves, the big reason the Fed bought agencies back. No wonder Geithner Hillary assurances were laughed at by Chinese students and G20 ministers.
    China kept the Renminbi Yuan down buying dollars.
    As soon as they have strategic military supremacy they will stop.
    The interesting thing is reports Paulson, Rubin, HW and W China investments are going sour.
    Russia wants to return the 1998 favour of the Ruble Bond collapses that took out LTCM by trashing the dollar. Rumour Reagan Bush Casey made trillions breaking the Ruble and collapsing the Soviet empire with Afghanistan.
    Is history repeating itself again with USA overcommitted by warfare welfare?
    A weak dollar destroys the American economy demand for their product, as China and OPEC well know, so they are against it.
    The biggest reason for our trade deficits is not oil, but manufacturing imports like cars and Walmart, which are taking care of themselves with US unemployment.
    If sovereign wealth funds are included, Abu Dhabi UAE reserves are ahead of Japan, number two, and the #3 Eurozone (Germany). Friend ran money for UAE using astrology. Green energy uncompetitive until $300 oil, which breaks the US economy. One obvious easy solution is to open up domestic drilling to reduce red tape and US energy imports. This may not happen until unions are broke because of government layoffs forced by growing outrage at government boondoggles and FEMA, DHS, TSA genital groping by $15 an hour perverts.
    Ultimate Buffett headfake would be dollar rally to 115, SPX rally to 1590 versus competitive devaluation currencies, modern equivalent of destructive Smoot Hawley trade tariffs, while gold goes to 1580 or $1700.
    CPI was redefined to keep COLA costs low for corporate and government pensions. True inflation around 8%, with unsustainable spikes in cocoa, coffee, corn, cotton, oil, sugar and wheat from 80 to 148%. (Oil $35 to $87 in two years.)
    Uncle Ben’s claim we need more inflation just him trying to get out in front of a Wall Street parade at the expense of Main Street.
    My thought after looking at various money bases, multipliers and velocities slowing or contracting, plus the old bank money circulating, is that the real inflation may come further out on the other side of another 2008 debt default deflation collapse as soon as 11/11.
    Kudlow takes his M2 Commodity inflation charts from this years’ QE, which means little at all since the money isn’t finding its way anywhere but Wall Street bond, commodity and stock markets increasingly out of touch with Main Street economy.
    John Maynard Keyenes is dead.
    PS I have two interesting investment banking founder deals for a large accredited investor or two.
    One is
    The other is the largest grower of medical marijuana with an exclusive franchise. People are still making lots of money…

  • ricecake November 9, 2010, 6:54 pm

    “There is no possibility of agreement at the upcoming G20 summit because the U.S. is declaring financial war on other countries, believes American economist Michael Hudson. The U.S. has been pushing China to revalue its currency — at a time when Washington has been pumping billions of dollars into its economy — a move viewed by other countries as an attempt to deliberately weaken the greenback. The issue of exchange rates is expected to be one of the toughest discussion points at the G20 summit in South Korea later this week. Michael Hudson, a renowned economist and Wall Street financial analyst and advisor, says the meeting in Seoul will not bring an end to global currency wars. “The U.S. is going to China and saying ‘we want you to commit economic suicide just like Japan did. We want you to follow the same way: we want you to re-value your currency, we want you to squeeze your companies, we want you to go bankrupt so we can make our profit at your expense,” says Hudson.” Source RT

  • jazzmaniac November 9, 2010, 6:44 pm

    I get a little irritated with the broad brush laziness of commentators like yourself who see all state pensioners as parasites on the body politic. In Arizona we have an entirely participant funded retirement plan that as of late has a contribution rate somewhere north of 10% of one’s gross. I’m not entirely up to date since I was laid off 18 months ago at the age of 55 after 24 years of service, just 4 years short of my full retirement. Now I scrape by on a third of the amount I once expected while searching for a job that doesn’t exist. And by the way, Arizona also has the lowest unemployment rate in the nation – $240 per week – which I don’t qualify for because of my munificent pension.

    • DG November 9, 2010, 10:22 pm

      Did not intend to paint everyone. There are varying degrees of irresponsibility. Some pensions pencil. Most don’t. The unfunded liabilities (read-don’t pencil) from medicaid, medicare, to fed, state and county pensions are well documented. They were a fraud from the getgo. It is very similar to any Ponzi. They are not investments. They demand new participants in order to pay off the old ones. You should be outraged because you paid into this fraud system and now they are working you on technicalities. I think the concept of defined benefit is flawed, but that is just me. The flaw is that it assumes an unpredictable future.
      It is a mess. I think we should accept the fact that it is a mess and cash everybody out and start over with a clean slate, but alas, that will never happen, and that is my point.
      I’m sorry for your situation.
      I did an exercise with a relative who was a lifetime public employee. We figured out that I will have contributed more to social security than they did for their retirement. Their retirement is triple what my social security benefit is. At the same time, it is broadly accepted that I will never see anything and their pension is rock solid.
      Nutz. That’s my point. It is simply flawed math. Much like Madoff. Yet we all accept it to be truth. Denial is the first stage of loss. then anger, then acceptance. We need to get to acceptance quickly.

  • Markus Gaertner November 9, 2010, 6:42 pm

    … I hate to say this, but I guess your scenario is very realistic. Yes, it will be nasty. Yes, there are too many incentives preventing change before it´s too late. And no: The pressure in the cooker is not high enough to enforce the great family reunion: When Obama was elected, steam was let off; with the tea party, more steam was let off; revolution against the Administration in times of war ? – unpatriotic !; and too many are happily sitting in fron ot their TV, enjoying the last real option: Deal or no Deal. – We won´t have a deal in the end, it will be necessity dictating the outcome. – I liked the “control-alt-delete” analogy …..
    Markus in Vancouver

  • roger erickson November 9, 2010, 6:28 pm

    The Currency Manager and the Output Gap
    A populous hired an Ass to manage their currency supply through many varying contexts. The times being intensely demanding, and context demands glaring in their strength, the entire populous stopped to rest their heads, and sought shelter from thinking under the Shadow of the Output Gap currency metrics. As this soon afforded disparate protection, and as the populous and the Currency Manager both claimed it, a violent dispute arose between them as to which of them had right to manage the currency Shadow Metrics. The Currency Manager maintained that he had no responsibility for the Output Gap, but had right to independently manage the currency Shadow Metrics. The populous asserted that they had, with the hire of the Ass, hired for management of both the Output Gap and its currency Shadow Metrics also. The quarrel proceeded from words to Congressional Hearings, subterfuge and lawsuits, and while the fools fought, the Output Gap galloped south.

    .. In quarreling about the shadow we often lose the substance.

    with apologies to Aesop

    2000 years? no change in net intelligence?

  • David Tanner November 9, 2010, 6:06 pm

    Who will the angry mobs blame? I’ll tell you who…. whoever the state tells them to blame and my guess would be YOU AND ME! When all this comes down, better have a little stash of gold and a place outside our borders to run to because YOU free thinkers who refuse to drink the cool-aid will be public enemy number one!

  • roger erickson November 9, 2010, 4:39 pm

    This entire discussion seems to fall prey to the Bill Black Conundrum – the all will be better off once “every country’s exchange rate is above average, and all nations are net exporters.”

    That will happen only in the dreams of residents of Swamp Webegoners. There are always degrees of freedom – meaning more options – beyond hand-wringing & naysaying. We’re seeing nothing here that a little public initiative and coordination cannot fix. Sure, the 40% of US residents who are obese may have to get off their rear, turn off the tv, quit eating crap, raise more of their own food, and cooperate with their neighbors to build their own stuff – instead of being enslaved to credit from BoA to spend at WalMart. That 40% of America could go a week without eating a calorie or shopping at WalMart – and be better off for it! That alone would bankrupt China.

    But that will be a good thing. Go for it.

    • mario cavolo November 10, 2010, 5:29 am

      I appreciate your POV roger but bankrupting China is the last thing we want to do…thankfully they are doing well, if they weren’t this whole mess would be a whole lot uglier across the globe…Cheers, Mario

  • GMC November 9, 2010, 3:40 pm

    ALL currency will decline against GOLD

  • Martin Snell November 9, 2010, 1:18 pm

    Let’s get real.

    Before Reagan was elected the US was the largest creditor nation on the planet. It is now the largest debtor nation in history (and most of the time it was Republicans in charge).

    The US had an immense advantage after WW2. The rest of the world had had its economies destroyed, and the US was able to benefit by supplying almost everything to everyone.

    But to think that in a closed world economy (no trade with other planets) that one nation would be able to maintain a standard of living that far above the rest of humanity forever is delusional. The problem of course is that Americans came to see it as their birthright. But it is not.

    The world does not have enough resources for everyone to live at a US style (or even close). The US has, until recently, been using 25% of the world’s oil with only 5% of the world’s population. Does anyone really think that that is sustainable?

    So the US continues to live like the old days. One-half of the trade deficit comes from imported oil (the best example of living beyond ones means). Probably 60% of the oil it uses is imported. That was okay when the US was self sufficient, but those days are long gone (and no, no matter how much you “drill baby drill”, those days won’t come back – oil is unfortunately a finite resource). So by refusing to face reality (i.e. constraints), every day the US sends $1 billion overseas, every single day. The solution (higher prices – even Canada, an oil exporter has higher local prices than the US, a massive importer – is a political no-no).

    It is the same all around. The population realizes something has changed (“I want my country back” attitude). But expecting the good old days to return is about as likely as a 50 year old getting back the vigor he had as an 18 year old. It ain’t gonna happen.

    Unfortunately the powers that be, Reagan’s “Morning in America”, Bush’s “keep on shopping”, Bernake “money from helicopters”, and most importantly Bubbles Greenspan, have done everything possible to prevent reality from biting.

    The US may or may not implode. Japan hasn’t and neither did the UK (as its empire fell). Rather long slow declines were the result.

    It didn’t have to be so painful. The US has a lot of advantages that could have helped it maintain a “lead” for a lot longer. But decisions like a refusal to conserve energy (by putting prices higher), a refusal to cut military expenditures (spending 50% of world military expenditures is unaffordable), putting Social Security “on budget” (yikes), and running with the mantra that “deficits don’t matter” all but guaranteed an ultimately more serious decline.

    Now it is pay-up time. The standard of living will fall (as the dollar declines, and the debt burden bites). The solutions now will be much more painful, and so will be put off even longer. There are ways out (barely) but they run so counter to the American way that they can not be implemented. So like the monkey with its hand stuck in the coconut grabbing the candy as the hunter draws near, it is unable to let go of its candy (and escape without the candy) and so will soon face its more gruesome fate.

    • mario cavolo November 9, 2010, 1:38 pm

      Nice approach Martin and thanks much. I’m definitely in the “long slow decline” camp and we shall see. However I wonder the tipping point on the dollar decline and its impact. There is a paradigm shift in the making; it used to be “Work and make bank in American then go retire cheap elsewhere”. Now for the next ten years its looking more like “Make bank in Asia and then go retire with a nice cheap suburban house in America” is the new reality. At what point will the declining dollar lead to a reversal of the money flows back into America as it becomes cheaper and cheaper to invest in which will lead to the next economic phase back up…? There are balance points. I’ll make the call at a 20% decline in DYX; 20% of 77 equals 15.4. So subtracting, the (+-) 61.6 range will be the dollar’s new solid long term support at some point in the not too distant future. Seems reasonable as hell to me that the world will be snatching up America on sale then, to create the next new America of world history.

      Cheers, Mario

    • Martin Snell November 9, 2010, 2:11 pm

      I agree with you Mario. America needs an inflow of new productive money (not just buying Treasuries). America does have space, climate, and in many places very cheap real estate (when compared with the rest of the world). There are more than a few folks that would pay quite a bit to move to the US.

      I lived in Asia for a number of years, and my wife is from there. Our hope had been to retire there (better food! and an ability to live cheaply). A small place in the mountains of Taiwan would make a nice home, but my wife has now started looking at cottages here that are becoming cheaper and cheaper.

      Also on the retirement front I always thought the best “outside the box idea” was for the US and Mexico to have a formal “trade agreement”. The US would trade its seniors to Mexico for younger workers. It would be a lot cheaper for Americans to retire there and it would provide local jobs to Mexicans. In return the US would get a supply of legal workers from Mexico. It could be a formal set-up where each retiree going to Mexico would allow say “X” Mexicans to come to the US.

    • BDTR November 9, 2010, 3:41 pm

      Yes, thanks Martin, for that bit of thoughtful, civil objectivity.

      Amidst the popular and easy web rants of superficial anti-government blather emanating from the self-centred, self-absorbed and mindlessly privileged cry-babies decrying the advantages of the poor of the world against the interests of the investment class, it’s fresh air indeed. Noted, too, is the sensible as always Mario.

      America and Americans have much yet to contribute to the world. We could begin by surrendering the fantasy that we’re the ones exclusively deserving the lions share of the worlds resources at a gun to the head discount from Asians, Africans and Latinos. A long, bloody and irrefutable history of corporate corrupted foreign policy pretentious to the “spread of democracy”.

      We could then acknowledge the fraud that using the undereducated, underemployed and cynically exploited youth of our nation as canon fodder for system gaming corporate interests is unforgivably criminal in its negligent myopia.

      Maybe then we could see how stupid it actually is to expend so much froth exempting our citizen selves from responsibility for not making government more responsive to issues that truly serve a liveable future.

      Our demands on government are either demands on ourselves, or they are the hollow deceptions from the mouths of hypocrites.

      Don’t like the arbitrary power and criminal behaviour of bankers and military dependent corporate leeches usurping government, bleeding a dying economy and destroying rather than enhancing prospects for a world of shared equity, political autonomy through diplomacy and environmental sustainability? Then stop your personal patronage of them, dump their dollars for actual money. That’s where the revolution of personal political power begins. Not in assuming faith in political pretenders spouting fear of some phantom enemy du jour. We lazily, fearfully waste our personal freedoms and in so doing reinforce a corrupted system that diminishes them.

      Government isn’t the problem. We are.

    • Steve November 9, 2010, 5:39 pm

      BDTR, Are we there ? Is disenfranchisement a reality, or is it too hard to change and only something easy to talk about? You are sorta right about “We Are the Problem”, but; the “We” is way too inclusive because there are the few who have disenfranchised only to come under coercion, intimidation, and threat by democracy and U.S. 14th corporate enfranchisees as false peers. First, one must understand what current democracy is, and until the “will of the masses” is unable to overcome the Rights of the Individual we will have nothing, and no hope of change.

    • mario cavolo November 10, 2010, 5:25 am

      Martin, that U.S. Mexico swap idea is fabulous, first I’d every heard it…seems quite the win/win…amazing if the politicians could actually ever do it though….M

  • mario cavolo November 9, 2010, 11:53 am

    Wishing for a more moderate future, I’m thinking that the dollar index will, say, decline 20% from here over the course of the next five years toward 60. That will hurt some and be good for others across America and across the globe. This would reflect the real and for some, painful global economic shift taking place with the rising of the cash-rich East and decline of the debt-burdened West.

    However, to think, for example, China will allow or encourage a dollar destruction is a flawed belief. China’s GDP will approximately double to triple in the next 7 years adding trillions more to its power, not to mention the leverage of that power across the globe. They will, therefore, wisely continue purchasing U.S. reserves to help maintain a modicum of stability, to invest another trillion in U.S. reserves in the coming years is a small price to pay for the growth they will experience. This is not a big deal for them, they are winning and they will continue to win. They are masters at pragmatic decision-making on such matters. Did you know that even today, USD reserves are only 10% of China’s total reserves?…so its no big deal for the Chinese to add another trillion to maintain that ratio in the coming years.

    I continue with little belief in the the sudden doomsday type scenarios believing it more of a slow, ignorant, miserable decline for hundreds of millions who are powerless to change it, while the polar and equally opposite group rises to new riches. The “death” of the dollar…? Not really; just a weakening, a serious adjustment that the global economy will absorb and adjust to. And so it has gone and goes once more in world history…

    Cheers, Mario

    • rmsimc November 9, 2010, 2:09 pm

      Did you know that even today, USD reserves are only 10% of China’s total reserves?

      I know that I am not as close to this matter as you, but I read that China owns more than $800Billion in UST debt (eclipsing only the Fed, btw). I had no idead that China’s current total reserves eclipsed 8Trillion USD equivalent…I thought is was more like $2.6T. Am I wrong?

    • John November 9, 2010, 3:10 pm

      Mario in order for the USD to go to 60 the Euro would have to attain new all time highs. Why are you so bullish on the Euro ? Seems like they are in a very precarious position here. I would love to hear your bullish scenario for the Euro.

    • mario cavolo November 10, 2010, 5:23 am

      Hi John…you bring up a great point about the Euro being as bad as the USD. I certainly can’t say I’m bullish on the Euro. This point you bring up also supports my belief that “death of the dollar” and other doomsday scenarios will and actually are extremely unlikely to happen in the market with some sort of specific gov’t interventions/announcements that will cause the markets to roil and will spell huge trouble…Cheers, Mario

  • Bay odf Pigs November 9, 2010, 9:24 am

    Indeed. So where are the gold bears now? Silver bears? Nowhere to be found.

    • Steve November 9, 2010, 5:23 pm

      Wrong !

  • Steve November 9, 2010, 3:05 am

    Yes, a paper note [federal reserve note] that its maker refuses to call a Dollar, and; persons who will give nothing to Liberty if it causes discomfort via a hangnail. Someone’s fuel is going up in price, but; there is no increased wages to chase it. There are fewer jobs being chased by more workers without jobs, and; soon they will be without unemployment payments. Who is chasing what to create this hyperinflation ? Real terms, 5.00 bucks an hour in 1950 was better than 60k today. Someone out there has the stats on 1913 federal reserve note ‘value’, real specie Dollar ‘value’ compared to today. Nice story Doug, though I suspect you know what will happen when the benefits stop. Harry Reid will not need to worry. He will be protected, yes ! But you, if you have a generator to keep your lights on, it may not be so nice.

  • JohnJay November 9, 2010, 2:27 am

    Amen, Doug.
    As we are reading this, our fearless leader is in India announcing another “Free Trade” miracle!

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