Zeev: This will be my last post before I take off. I remember the Marshall plan. I also remember the double digit inflation with gold hitting $850 an oz. I further remember the market collapse 74% of its value in 1974.
As a fundamentalist, you know we have to float paper or inflate to finance both trade and budget deficits. Could you think of a better way? We all know these actions will come back and haunt us. If we don't pay now, then our sons and daughters will pay for the sins of their fathers. Should you have time, just figure out the interest payment for these deficits and you'll know what I mean.
By analyzing what your wrote: "In the short term, we have deficits with them, but in the longer term it will be a safer world, and they will eventually buy more from us." I believe that you have made several assumptions:
1.The US economy could withstand additional debt with zero hiccups.
2.Foreigners who hold our IOUs are friendly and continue to be friendly.
3.Foreigners who hold our exported greenbacks are NOT going buy up companies and other assets in US.
4.Short/long term interset rates will NOT rise.
5.China will be an international laws abiding country (Please note the copyright fiasco which is backed by the military).
6.China will respect human rights (For a nation that have abused human and human rights for 4,000 years, fat chance!)
7.China will pay US with hard currency, and NOT with garbages such as several thousand containers that contain all left-footed slippers.
Zeev, IMHO, trade deficit may not mean much for the short term but for the medium term, it will have a negative impact to our economy. Of course it matters little or nothing for the longer term because you, I and all the present Internet surfers will be all dead. Our sons and daughters will have to pay and pay and pay.
I am NOT optimistic in Year 2,000 and beyond. I believe by then we will be at the tail end of a supercycle when all hell is going to bust wide open. I see the second depression dead ahead. When I come back in July, I hope we can exchange more information in order to survive the coming debacle.
May you find peace and prosperity.
Regards,
Mad Monk
PS. I am NOT a pessimistic person. Every morning when I wake up and take my first breath, I thank the Creator by screaming out in total silence, "Thank you for keeping me alive!"
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