About time. Wake up & smell of coffee.

[jaguar]

Just to make this clear (without all the article and the much longer supporting one it isn't entirely clear). There are two options from here, Bush stands up, admits he's a halfwit with the IQ of a gherkin and the same comprehension of economics as a three toed sloth and those around him have been too bush fleecing the government to line their own pckets to care and instigate a massive program to reduce the budget deficit or continue as is and the dollar will slide, the housing bubble pops, interest rates rocket and the dollar ceases to be the reserve currency of choice for discerning central banks.

[dar512]

So, Jag, did they say who's most likely to step up to the plate? Whose currency are banks turning to?

[jaguar]

Euro to a degree but more a diversified approach than a switch from one to another.

[atropos]

On the gold question, you can go down to your local coin shop and buy American gold eagles for the gold spot market price plus a small buyer's fee (usually around $15.00, at least when I purchased them) per coin. I have also acquired some coins along with my stocks and as of today, I could resell the coins at a nice profit even including the original buyer's fees.

As for Bush's economic policies, the jury is still out. The US economy seems to be making a slow but steady recovery, and the housing market here in Cali is booming - especially when it comes to industrial and office properties. What people around here refer to as the "inland empire" region of California is making an especially good recovery.

I find it rather difficult to share Jaguar's gloomy outlook - mine is one of guarded optimism. But then I'm just a valley girl, so what would I know?

[russotto]

The USD's still in the tank, though. Might just be a trailing indicator, might even be deliberate policy (a weak dollar hurts imports, which is why the Japanese banks try to prop the dollar up) .

I suspect the Europeans will eventually do something monumentally stupid (no, George Bush does NOT have a monopoly) and put the Euro in the tank instead. There's not going to be a wholesale rush from the dollar any time soon.

[jaguar]

The idea behind US policy at the moment is that a weak dollar will offset the deficit. It's a flawed idea. It'll work but as the article points out, the cost will be huge - sharp recession and the dollar losing it's status. The US 'recovery' so far is based on asset price bubbles and a very dangerous level of consumer spending, both factors that will make and downturn much harder and sharper as interest rates rise.

What happens to the euro depends on what happens with the EU which at the moment is the new constitutional treaty, if that all goes to shit it's an open game.

[tw]

Lets put some sound bytes to what Jaguar has posted. First an exact quote from Cheney in a senior level meeting titled "Economic Growth" in June 2002:

Reagan proved deficits don't matter.

Spend and spend more? Others versions are "pay now or pay later". Steal from Peter to pay Paul?

Why was Paul O'Neill (Sec of the Treasury) fired? He refused to go along with another money game - the second tax cut.

Companies that should be proclaiming serious losses have instead shorted their pension funds. It makes them look good now - in the hope that the economy will get better. Don't believe it. This is as good as it gets. Rediculously low interest rates are simply maintaining - not creating - jobs. Storm clouds overseas are growing ominous. For example, the central bank of China is said to have absorbed so many dollars (to protect their exports) that it is now 80% dollars. Sooner or later, they will have to dump that money - at the expense of your net worth. That is how economics works. A 40% drop in you net worth and income is how economic forces impose penalties for irresponsible fiscal activities. Why? Did Reagan really prove deficits don't matter - or is that an excuse to make them look good at the expense of your future?

Cheney and company discovered some real suckers - who forgot all the lessons of late 1960s and 1970s.

Anyone can mortgage a government when the people don't care. America said it is better to lie. Don't worry. Be happy. Sound bytes so that anti-Ameircans - people with ostrich mentalities - will support a mental midget president. So how will we pay for the attack on Iran? We refuse to admit how much we have already spent on Iraq. Those bills remain largely unpaid. Where will all this money come from? As always, the suckers always pay both big time and later.

These are the good times. How big is your cushion when world economic forces demand payment for all these past due bills.

Did you read Greenspan's last speech? They must be read slowly and carefully. He has been sounding a warning for some time in a hope to cushion the crash by easing us down. Number one problem he always points at - the George Jr wild spending sprees. Reality, only Democrats have displays fiscal responsibility. Republicans (except George Sr) have a bad habit of telling lies we believe.

[Troubleshooter]

www.goldline.com

[Kitsune]

Thanks, Troubleshooter -- there are some nice coins up for sale. I noticed most of them are not minted in the US, so does that mean that by purchasing with my US dollar that I will be losing out?

[russotto]

The problem with the idea that the dollar's decline is deliberate policy is that it assumes US policymakers have a far greater level of control over the dollar than they really do. There are reliable ways to devalue currency, but if the US govt was taking those than core inflation would be a big problem, and it isn't.

I don't see the US recovery being a false one; rather the opposite, the period of stagnation following the recession has been artificially lengthened by exceptionally conservative investors and board members (many in those overlapping groups having been burned by the dot.com bust) and of course terrorism and Iraq. The fundamentals are there and the capital is there but the willingness to take risks has been absent. This is also a large part of what has kept employment down.

The Euro is too potentially unstable to replace the dollar at this point; the US government is far more stable than the EU, and that's the dollar's big asset.

BTW, the original article's claim that a decline in the dollar amounts to default on government debt is more than a bit unreasonable; if you're going to invest in foreign-currency-denominated debt, the risk of that currency falling vis-a-vis your own is a normal one. If the US was taking the easy way out of just printing money, you could call it something akin to dilution, but that's not the case.

[Radar]

The U.S. Government is not stable, and will become part of the new EU when Bush signs the FTAA.

[jaguar]

if you're going to invest in foreign-currency-denominated debt, the risk of that currency falling vis-a-vis your own is a normal one.

That's a matter of scale. 30% on tens of billions is noticeable you know. The US *is* printing money for all intents and purposes. Snow was jumping up and down today saying they'll cut it to 2% of GDP in the next four years, I don't swallow it.

That's the thing. The fundamentals *aren't there*. The numbers don't work, either the government reins in spending bigtime or the shit hits the fan, it really does boil down to that. As it stands the only reason interest rates aren't getting a rocket up the arse is the various asian central banks buying vast wads of bonds, if the dollar keeps sliding they'll stop and if the rate of debt keeps creeping up, as estimated, more and more will stop being willing to finance the reckless financial policies of this administration, a collective vote of non-confidence by the financial community in Bush.

[Troubleshooter]

Originally Posted by Kitsune

Thanks, Troubleshooter -- there are some nice coins up for sale. I noticed most of them are not minted in the US, so does that mean that by purchasing with my US dollar that I will be losing out?

You're not really buying other nation's currency as much as buying a coin with a known volume of a known tradeable metal.

[tw]

The Economist magazine has had some articles lately about the sad state of American economic conditions. Cited as the most significant reason for this problem and one easily corrected is the Federal Deficit. US government is leaking money throughout the world by selling Treasury Bonds. One reason this problem has gotten everyone's attention is that countries such as Germany and China have decided to cut back on their T-bill purchasing.

Remember we paid very little for the liberation of Kuwait. We are throwing money at a 'we broke it' Iraq problem as if money were a grenade that solves all problems. Somebody has to pay our bills (because Cheney says deficits don't matter) - or our bills become even more expensive.

The first $trillion excess out there took about 10 years. The second $trillion has only taken 18 months. This second $trillion got the attention of our trading partners and T-bill buyers very quickly and recently.

A chart from this week's The Economist demonstrates the problem.

[richlevy]

This Just In -

BERLIN - The dollar dropped sharply against major currencies Wednesday after figures showed that the United States' trade deficit soared to an all-time high in November.
Worries over the wide U.S. trade and budget deficits have been the key factor in the dollar's decline in recent months against the euro, which reached a record high of $1.3667 on Dec. 30.
The Commerce Department (news - web sites) said the November deficit was up 7.7 percent from an imbalance of $56 billion in October, which had been the previous monthly record. The new record — $60.3 billion — surprised private economists, who had forecast a slight narrowing in the trade gap.

So it's spend, spend, tax rebate, spend spend.

While Washington insists it has a "strong dollar" policy, many analysts believe the U.S. government is content to see the dollar fall because it makes U.S. exports cheaper.
Comments reaffirming the "strong dollar" policy this week by U.S Treasury Secretary John Snow were seen by markets as indicating a hands-off approach and failed to strengthen the currency.
On Wednesday, Snow played down the record trade deficit, telling reporters in New York that "the trade gap reflects the fact that Americans are becoming more prosperous."

So if I run up a $40,000 bill on my credit card it shows I am successful because someone was willing to extend me that kind of credit.

At least Greenspan wouldn't compromise himself by saying something so stupid. Snow understands what it takes to be successful in the current administration. (Tony, can we have an ass-kissing smiley?)