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Politics : Stockman Scott's Political Debate Porch
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To: stockman_scott who wrote (14)6/6/2002 10:46:08 AM
From: Jim Willie CB  Read Replies (3) of 89467
 
dollar is a non-issue until it falls in value
until our unprecdented high import levels start to import some inflation
I believe that from 1990 to 2001 we had created fiat currency to pay our federal bills, created more to pay our trade gap bills, and simply sent off the printed money in exchange to foreigners

well that is about to change
all things are not normal anymore
now with declining dollar, imports will cost more
and that will be a very big shock to this economy
we are utterly dependent on foreign mfg of goods (not services)

HERE IS THE MAJOR RUB RISK
as imports rise in price, domestic producers also climb in under and raise their prices
the declining dollar opens the door to domestic price inflation

reminds me of green wetbehindtheass kids who say
"I am a longterm investor" when their portfolio drops 20%
they repeat the mantra when it drops another 15%
then they bail out to preserve capital 10% lower still

THE CRUEL LESSON UPCOMING IS THAT FOREIGNERS WILL TURN AWAY FROM THE DOLLAR AS A RESERVE ASSET, STORE OF VALUE
serious consequences from it on pricing front
serious consequences from it in world banking
since the TBond lies as 75% of reserves in foreign banks
it could cause a very deep world recession

/ jim
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