My strategy is to hope for a soft landing on these issues, that the Chinese and others who hold T-bills as their reserves don't put the screws to us. I'll then say a novena to St. Jude, the ex-saint patron of lost causes, praying that the American consumer starts to save, pay down his bills, and not overextend himself any more than he has already.
I'll also hope for fiscal responsibility, but I don't think that even St.Jude's intervention will be much help.
But whatever happens, immensely destructive or simply a long painful period, I'm going to formulate and execute on an investment plan that will take into account all these risks. I don't exactly know what form it will take yet, though I will definitely increase my exposure to foreign assets. Perhaps even a little gold.
From a policy standpoint, there are obviously a few things we can do, none of which are politically palatable, i.e., decrease government spending, increase government revenues, and somehow promote savings, even subsidize them in some intelligent way. None of this stuff requires anything structurally new, simply a refocusing of what we are doing. |
