As usual Richard Russell tells it like he sees it. In this letter he also includes an excerpt from an Australian publication...always useful to see ourselves through other's eyes.
Regards, Phil
Excerpt from Richard Russell's Dow Theory Letter:
"Sometimes it’s beneficial to hear what our foreign friends say about the US condition. For instance, here are a few very telling paragraphs from the very excellent The Privateer out of Australia www.the-privateer.com.
There are 189 nations that are members of the UN. The USA has a military presence in 140 of these nations, yes, 140 nations. The US military has major foreign bases in 36 nations, and it has more than 260,000 of its troops stationed overseas, plus another 50,000 constantly afloat with the major US carrier
groups. In total, the US military has more than 800 bases overseas, small and large, including 60 major ones. Of course, it is known that there are about 37,000 US troops in South Korea and 71-76,000 US troops stationed permanently in Germany. But to that, without making all this overly lengthy, can be
added the US permanent bases in Japan, Taiwan, across Europe, and now in the Middle East. It is true that this US military presence has been there so long that it has become a sort of fixture of the landscape, but that certainly does not mean that the people living in all these places are not annoyed.
The Privateer also has something to say about US finances and the dollar.
With the EU’s euro touching $1.055 and Gold $US 350 at the end of 2002, the world is staring straight at the prospect of accelerating further falls in the value of the US dollar. With the US treasury on a borrowing trajectory of $US 1 TRILLION plus over the next year and the US Federal Reserve on a US dollar quantity increase of also about $US 1 trillion over the same period, the hard fact is that the US is monetarily and financially OUT OF CONTROL! There is a war in prospect, in late January-early February.
The global inflow of $US 500 billion plus from foreign investors is in danger of turning around. The US Dollar is set up perfectly for one of history’s greatest dives.
Page 3:
That’s the view from Australia. And it’s not a very comforting view.
One of the incredible problems today is that debt is building up so much faster than the gross domestic product. This process holds within it the seeds of a great deflation. It’s estimated that all US debt, government, state, corporate, individual, runs to about $38 trillion. The cost of carrying this debt is immense. And the question is whether at this point the US economy can generate enough in the way of profits to carry all this debt.This is probably the biggest question in the economy today. And you can see how desperate the Fed is to keep
the economy simmering and also to ward off deflation. A recession here would cut sharply into profits, would increase unemployment, and make carrying the $38 trillion in debt almost impossible. This is the danger that the nation faces today. Any slip into a profit-crunching recession would also bring about deflation as the cost of carrying the monstrous US debt would become more than the nation could bear.
Thus the big picture at this time is a balancing act. Can the Fed manage to fight off the forces of deflation and recession? Or is the rapidly growing debt mountain so large that no amount of Fed manipulation can ward off the gathering forces of deflation and recession?" |
