Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Gold/Mining/Energy : Gold Price Monitor -- Ignore unavailable to you. Want to Upgrade?

To: GST who wrote (51630)	4/17/2000 8:41:00 PM
From: Hawkmoon	Read Replies (2) \| Respond to of 116764

I am not sure if you understand how things work so indulge me with a few basics I'd be happy to since you apparently need a little macro-economic tutoring. The strength of a nation's currency is a reflection of its economic strength, its governmental fiscal prudence, and the strength of it political will and unity. Let's look at some of the competitors to the US dollar: 1. Japan... Well, what can we say? They have little political will, being a government based upon consensus politics that prevent economically hard decision from being undertaken. They are in recession with an ever increasing aging population (1 in 4 will be over 60 within 10 years I believe), and their national debt now will soon equate to 150% of their current GDP. They continue to practice inefficient economic stimulus programs that throw good money after bad on make work projects that will not yield terrific economic benefit in the future. They are mortgaging the future of their ever decreasing young people for false relief in the present. They have little cultural history of encouraging foreign immigration and few desire to become Japanese citizens. Finally, since the Japanese people possess some $12 Trillion dollars in personal savings, and Japanese interest rates are running at less that 1/2 a percent on personal savings, they have great incentive to move that money into other currencies that pay a higher interest rate (and thus are more efficient at turning a profit with such "expensive" money"). Higher interest rates breed greater efficiency. The Japanese have no reason to be more efficient and profitable since cash is relatively cheap to obtain (if you have the collateral). All of these issues are quickly coming to a head and something will have to give, most probably a devaluation of the yen (relieving inflationary pressures on the US dollar from imported goods). I think that sums up the major points about Japan although not comprehensive. 2. Europe... well, here we have 11 nations or so, who are struggling to create a confederation of governments and cultures that will unify what has never been unified, except through conquest. Since a currency reflects the political and economic unity of the nation that issues it, it is little wonder the Euro has thus far proven a failure. And within each nation itself, there are cultural clashes that have YET to be dealt with, let alone exposing them to even greater stress by unifying. Europe also faces a SERIOUS future entitlement deficit for all of those lucrative social programs they have created over the past decades. Europeans have EVERY expectation and belief that their government will take care of them during their retirement. But alas, that is a scenario that will probably never occur and their governments will be forced to runn the printing presses to pay for those entitlements, running serious deficits in the process. Let's face it... over the course of history, Europe has never been able to "get it together" and there is no reasonable expectation they will without major civil strife or lots of compromising to protect each member's social economic "fiefdoms" (to the detriment of the whole). They will face increasing budget deficits and quite likely minimal growth, especially since there exists little respect for entrepreneurial capitalism at the governmental level, outside of the UK. They are still socialist enclaves where the big corporations are essentially socialist protectorates, subsidized and extended favorable tariffs against foreign competition. So where are these investors going to be more inclined to put their cash? Would they put it an economy that has been growing at 4-8% for the past decade, and is overall the greatest and most efficient allocator of their investment capital?? An economy SO STRONG and efficient, its Central has to raise interest interest rates TO SLOW its economy DESPITE the fact that there exist few signs of internal inflation consistent with such extensive growth?? A nation that has shown worker productivity continuing to outpace inflation for months on end?? (which means that higher wages can be paid since they are producing more per hour worked) Yeah... I think you need a little macro-economic tutoring GST. I hope I indulged you sufficiently and provided you enough to ponder and chew on that you'll adopt a broader analytical perspective to just WHY so many investors are putting money into the US economy. It's just the best chance they have for asset appreciation and currency safety. Certainly safer than their own economies where the days of reckoning continues to be delayed. Regards, Ron