Hi Elroy - I don't disagree with Paul Kasriel's basic sceanario - total debt problem, balance of trade & payments, and a pretty painful correction ahead.
What I do see are large discrepences in the statistics, especially balance of trade, which will cause many events to happen considerably later - maybe 6 months maybe a few years later - than we would expect to happen based on past experince.
If the balance of trade number were right, the dollar should have tanked last year, and it should take >>$1.50 to buy a Euro, and a USD should get maybe 90 JPY yen.
I would guess the balance of trader number is at least one 1/3 higher than because of transfer pricing and other tax avoidance games.
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Household savings/debt rate calculations are so far off, but the base household savings calculation does NOT count investment gains - weren't that many gains from the market when this measure was set up in the 1930s. That's only a few percent, and does not swing the number to positive (saving).
As for household assets, many high income Americans now have overseas bank or brokerage accounts, which they can access via ATMs. When the IRS went after this tax dodge, they found enourmous numbers of accounts. I think this is a small tweak to the numbers.
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Okay, how does this play out ? The gold bugs and hard asset crowd will need more patience.
Meanwhile, I'm loading up on some consumables in high demand (oil and gas), especially those where we get PAID TO WAIT - Royalty trusts.
I also have some Saskatcekwan Wheat Pool, and RGLD, and gold stock with dividends.
At some point many gold bugs will get tired of waiting for the sky to fall, and may sell out cheap.
There's a guy in this week's Barron's who expects the sky to fall soon. Useful in that he says get out of the USD NOW before captial controls - I think that's good advice. However I think he's maybe 1-2 years early.
Best Regards, energyplay |
