weaker dollar policy has many motivations
our trade gap is horrendous now, at over 5% of US GDP
the historic reaction to such high levels is for at least 20% correction
cheaper dollar will both discourage importing Asian products
and encourage exports abroad from our mfrs
the only problem is that a systemic shift took place from 1980 to 2000
the great majority of our mfg capacity has gone to Asia
and the great majority of our assembly plants have gone to Mexico
what do we mfr inside the USA?
I can list a few things, but will surely miss many
each listed item involves some US-owned mfg in foreign lands
for instance, Uniphase has a couple Irish and Scottish plants
- computer equipment, networking equipment, computer components, wireless components, fiberoptic components, construction equipmt, chemical products, photographic products, mining/energy drilling equipmt, specialty steel, pharamaceuticals, medical devices, environmental cleanup products, solar and fuelcell products, and more
but the sad fact is that most of what we make here, we purchase and sell here
the USA makes some world-class ultra-high-tech equipment
like satellite optics and communication devices
we make very little mass production consumer goods
that is Asia's province since 1980, only entrenching further with China's emergence
it gets much worse
the US Economy is, and is widely regarded as, the world's economic engine
so as the US falters economically, the world's individual national economies worsen worser worse
what happens to little Singapore or South Korea?
they stop exporting, employ less, save less, buy less
(the USA doesnt save at all, just ask your 25-yrold son or daughter of any American family, and you will hear they spend every dime they make, and then spend their entire Mastercard limit on top of that, living for today, to hell with tomorrow, someone will bail them out if they get in trouble)
so Asian economies that depend upon exporting will suffer as the strapped US consumers curtail spending, amidst job losses and overextended credit lines
Europeans are in worse shape than Americans in their businesses
almost 10% unemployment in Germany and France, where socialism has wrecked national balance sheets for decades
(we cannot let the lazy starve!!!)
Germany has now by far the stupidest Central Bankers in the world
(the USA has the most criminal)
Germany insists on fighting inflation until deflation shrivels off their genetalia to mere pasta noodles
so who will purchase these American-mfr'ed products with lowered prices?
some Europeans, not much more than that
it gets worse, for a simple reason
75% of the world's banks have reserves in the form of USTBonds
Asian bank systems might be threatened by a falling dollar, as they have saved their annual surpluses in the form of recycled USTBonds, under pressure by American political (and implicitly military) leaders
so what happens to the banks inside Hong Kong or Singapore?
their reserve requirements will be strained as bonds lose value
this effect will be exacerbated if TNote yields rise even as the dollar declines
that is exactly what I expect later, when the dollar decline intensifies, becomes a mild panic, and the USGovt leaders will be coerced via market forces to raise interest rates in order to avoid default in funding our socialist and militaristic structures
so who will purchase these American-mfr'ed products with lowered prices?
YOU GOT ME !!!
THE UPCOMING CONUNDRUM IN 2003 IS THAT A FALLING DOLLAR DOES NOTHING TO ALLEVIATE THE TRADE GAP, AND OUR LEADERS AND EXPERTS ALIKE WILL BE PUZZLED AS TO WHY, BEING INEPT AND ILLITERATE IN ALL WAYS ECONOMIC
(HECK, OF COURSE THEY ARE INEPT, THEY ARE KEYNESIAN MONETARISTS)
the conundrum will take center stage, since the USGovt deficit spending will accelerate, as economic stimulus becomes critically essential, as continued support to expired jobless benefits becomes demanded, and as elections approach in 2004
(the suffering citizens all vote)
so trade gaps will remain huge while federal deficits grow
in fact, I expect a $1 Trillion fed deficit by 2005
this is the end of the road for Keynesians and Monetarists
a quick background
Keynesians believe that govt spending (even thru deficit spending) can revive an economy thru tax breaks to individuals and corporations, small business discounted loans, public works, military outlays, extended unemployment benefits, aid to the needy, etc
Monetarists believe that Federal Reserve banking policy can revive an economy thru reduced interest rates, lowered banking reserve requirements, relaxed lending conditions, support of currency (to make imports cheaper), and even printing money to monetize Treasury debt or Agency debt or Corporate debt or Stock Market Investments
both Keynesians and Monetarists cannot explain the futile attempts to revive and resuscitate the Japanese Economy
they will not be able to explain the futility in reviving the US Economy either
but they will be given full opportunity to fail
their failure will be seen with a stagnant economy and rising commodity prices
their failure will be seen with depressed corporate earnings and rising unemployment
their failure will be seen with increased govt fiscal stress and rising defaults in states, municipalities, cities, and towns
(watch California declare bankrupty in 2004-05 after the federal govt refuses to bail them out, FOLLOWING the national presidential elections and Bushy is re-elected without the benefit of Calif's numerous Electoral College votes)
the falling dollar will not induce the typical expected response, with rising exports and falling imports, since the internal mechanisms are no longer at work, are no longer present within the system
we dont export shit
we import everything
a financial cyclone is about to hit the US Shores
IT IS CALLED THE US DOLLAR VICIOUS CIRCLE
one hell of a big storm is building
all governmental efforts so far have gauranteed a serious intensity and conclusion to the storm
such efforts have resulted in worsening balance sheets for corporations and households
debt levels have increased 10x more than income since 2000
and now the car sector, the housing sector, and corp capex are all nowhere near about to spring into action from a pentup condition
all three are utterly exhausted, or in the case of capex... extinct
on top of all else, energy prices will grab major headlines in the coming year, as neglect combined with political and environmental obstacles has gauranteed outsized price increases
(despite 20% added funding to natural gas drill projects, this finishing 2002 year has seen a 10% decline in gas production)
as Richebacher says, the level of competence among American Economists is simply horrible, as they ignore all the warning signals, think in terms of simplistic aggregates, and regard high levels of debt introduction as healthy
we are about to witness a colossal failure of Keynesian Monetarists
on a world stage for all to see
gonna be ugly
the best they can possibly do is avoid disaster, bring about constant pain, and allow pressure valves to explode....
LIKE GOLD
/ jim |
