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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: GST who wrote (71198)10/7/2006 10:10:55 AM
From: Tommaso  Read Replies (1) of 110194
 
To me, the key to the whole thing will be a falling dollar.

The loss of purchasing power by people in the United States for goods produced outside the country--and commodities--will encourage competitive devaluations and a worldwide rise in prices denominated in fiat currencies. But because of the enormous external debt, the U. S. dollar will sink faster against other currencies and therefore faster against commodity prices.

Wage inflation within the United States may be slower to kick in that in the past, since there are plenty of people who want to hold jobs. During the Vietnam War, the military not only was absorbiong material goods, but was taking a noticeable fraction of able young men off the job markets. That is not true now. So the lower-income segments of the U. S. population may just be content to become poorer. There are also lots of illegal (and legal) immigrants ready to take low-paying jobs. Unions no longer seem to have much power at all.

The United States can effect a gradual repudiation of the huge external debt by inflation of the money supply.

Once the sentiment of international bankers and governments turns against the U. S. Treasury as a safe haven to store profits, the dollar could begin a slide that will take many years to recover from. Many people in the United States will find themselves poorer every year. One bright spot might be farmers, many of whom may become (very deservedly) wealthy.

At any point, the United States could start to reverse this situation with policies that encouraged self-sufficiency in energy production, mainly nuclear power. There is still a huge fund of ingenuity, inventiveness, and intellectual energy that could be applied to solve problems other than how to kill people as efficiently as possible.
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