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Politics : Formerly About Advanced Micro Devices
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To: tejek who wrote (367134)1/16/2008 3:35:10 PM
From: Road Walker  Read Replies (1) of 1573432
 
So until this 'problem' is dealt with....and frankly, I don't know how you deal with it......there is always going to be problems with spending and deficits when it comes to the federal budgets. Its why I don't understand what appears to be a general complacency and inevitability when talking about "unwinding the deficit". Even if it doesn't mean what I think it means we don't want it to happen and we need to be doing whatever it takes to prevent it from happening. This business of tough loving our way through economic problems is BS. You maintain your style living in the best way you can; otherwise many people will suffer some serious pain.

It's debt but it's also the trade deficit. It actually has been unwinding in a relatively orderly fashion... just look at a dollar chart. When you see the dollar decline like it has, what it's telling you is that financial stability of the US is declining vs. the other country (in this case against all the major trading countries). It's been a rational reaction to the fact that they make and sell more valuable stuff (in total) than we make and sell... and that our personal and public debt are seemingly out of control (with additional risk that we may not be able to pay it back or worst case service the debt).

If I want to borrow $100 from you and I make $100 a week and owe $20K, you probably won't accept my IOU. If I make $5000 a week and don't have any debt you will probably say OK.

Now if you get a slow orderly decline... you will get a slow orderly decline in our relative standard of living but eventually the stuff we make get's so cheap things start to level out. If you have a "run on the dollar" (and the international credit crisis spured by irrational US debt practices dramatically increases that risk), then you will have sky high import prices coupled with a huge domestic slowdown and a giant leap in interest rates. Stagflation... at best.

Economists (including Greespan) have been talking about our "unsustainable" twin deficits for years... and how they would eventually unwind. And they have become worse, not better. Debt is real, money is real. If you owe it you have to pay it back. And it will come out of all our pockets... not some distant Federal Government. And frakly the Fed, in the end, won't much influence the outcome by cutting interest rates a few percentage points... in fact they may exacerbate the crisis.

We'll see what happens. These things have a mind of their own and nobody can predict unless they get lucky.

But I was right about one thing... it was a great day for a day trade!
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