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Strategies & Market Trends : Mish's Global Economic Trend Analysis
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To: Chip McVickar who wrote (24419)2/26/2005 2:20:28 AM
From: regli  Read Replies (2) of 116555
 
Chip, I believe that my emphasis on the decline of the U.S. is correct. Obviously a superpower doesn't decline quickly, it is a gradual process. However, from my perspective all the ingredients for a significant decline are in place:

- Imperial overstretch
- Unmanageable deficits
- Extreme dependency on foreign investment
- Highly unpopular in the ROW
- A disappearing manufacturing capability
- Hugely indebted population dependent on outside goodwill (investment)
- Highly capable commercial and industrial opponents

There are many more but I think these are some of the key ones. To address and rectify these problems will be highly unpleasant and likely result in a much smaller share of world GDP, spelling the decline I am talking about. Simply losing the advantageous position of having the world's reserve currency will level the playing field.

I don't think that the world's financial systems have to collapse in order for these shifts to take place. The dollar nowadays is just about universally viewed as a risky currency to be in. Not a positive! And as an aside, there was no collapse in the financial system and the pound still lost its status before the dollar took over.

However, I will not rule out a financial accident. I don't believe you should trade based on fear but as most smart people do, they buy insurance if a potential loss might hurt them significantly.
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