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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory

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To: shades who wrote (37084)	7/27/2005 9:41:38 AM
From: futures speculator	Read Replies (3) of 110194

Why would protecting the dollar be in the dems agenda? a weaker dollar will help all thier poor voters get jobs no? Why would protecting the dollar be in the repubs agenda? Protecting the dollar helps who and hurts who? These are excellent questions. IMO it's not so much about debasing the currency to make labour more competitive (you could never bridge the gap, Chinese wages are 1/30th of US and Indian wages close), as it is about doing something about the DEBT (federal and household). While I believe that currency debasement should not be used as the method to solve a country's debt problems, as it penalises "prudent" savers and rewards mindless risktakers (e.g. the real estate speculators of the last 3yr), in my opinion it's basically only way left to get out of the current total mess. The alternative would be a agreement between US and Asia, where a large part of US debt will be forgiven, like it's done with third world countries. The third alternative, would be a deflationary collapse which NO GOVERNMENT IN THE WORLD would choose, unless it was powerless to prevent it (which would be the case if we had a "honest money" - gold-pegged system). Especially since all those dollar cash/bonds, more valuable in a deflation, are in the hands of foreigners. They would then come over in 3yr from now and shop US assets at 50% discount from current valuations. Do you think US policymakers and voters will like that? I know it would be the "ethical" thing to do, i.e. pay one's debts. But I very much doubt it'll happen. PS: I don't want to sound like I'm putting the blame on US citizens, because the "borrow and spend like there is no tomorrow" was encouraged in every possible way (e.g. negative real rates for years, rampant leveraged speculation in markets which zeroed risk spreads, Greenspan put in stocks etc)

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