Gidday Jfred. I think it's quite impressive that we are still in the saddle after the scale of the wealth effect destruction and shambles since Y2K. That's really impressive.
There's a lot less distance to fall now, so I don't think we'll get the cascading kind of collapse I feared for a few years. Sure, we could grind on down, with increasing unemployment and decreasing dollar if the claims that the US$ is overvalued and the trade deficit has to be stopped in a hurry.
The political stability of the USA remains a tempting haven in an uncertain world. Sure, China looks great for now. But they don't have the depth of institutional stability, law, political balance, military and so on that the USA has.
The Iraqi war is trivial, even if all the oil fields get shut and even if Iraq disappeared from the earth altogether. I imagine there are quite a lot of people who would think that no bad thing [especially if they got to take over the oil with nobody in Iraq to share it with].
The idea of inflation is about all there is. The pool of people who will work for the global median pay rate is huge. India remains untapped [more or less] and even China has barely got going. Indonesia is still at the machete stage of development and civilization [though they would complain that's unfair].
Uncle Al can print away and not cause significant inflation while hordes of people in India and China are willing to work for his dollars.
Anyway, here we are in 2003 and the big scary deflation bogey is nowhere to be seen. I don't believe it's real [in US$ anyway]. On the other hand, there's scope to pixelate a lot of dollars without inflation. So The Fed is on easy street.
Mqurice |
