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Strategies & Market Trends : The coming US dollar crisis -- Ignore unavailable to you. Want to Upgrade?

To: axial who wrote (20924)	6/22/2009 12:53:35 AM
From: GST	4 Recommendations Read Replies (1) \| Respond to of 71456

Japan has been running a massive current account surplus for the past 30 years -- you might want to brush up on your basic economic history if you want to make comparisons between Japan and the US. The inflationary impact of our federal deficits is a function of the massive current account deficit that we have been running for decades. Rather than being similar to the US, Japan shows us exactly what would have happened had we been in massive current account surplus for the past thirty years. Instead, our current account deficit puts us in a position about as different from Japan as one could possibly get. A valid comparison could be made between Japan and China -- and these two economies are tightly linked at this point with some strongly similar characteristics -- particularly with respect to their both having a super high savings rate and a sky high current account surplus. These two economies are the precise mirror opposite of the USA -- comparing the US to Japan or China is non-sensical. At the risk of being blunt, perhaps the reason you can imagine so many different futures for the US in terms of inflation is that you have yet to grasp the full implications of the corner into which we have painted ourselves. We have only one way out of the corner -- default. The initial steps towards escalating default have already been taken by the US Fed and the treasury -- and our global creditors are deeply displeased. If we had been running a current account surplus for the past few decades there would be no issue to discuss. But instead we have been bleeding to death, slowly at first, but with the blood now gushing from the jugular. Japan, in contrast, has never even had so much as a scratch. Their current account surpluses drove the yen up and they have struggled mightily to keep the yen from soaring -- exporting capital at a furious rate and trying to use government spending to quell the deflationary devil that continues to plague them. The Chinese have been confronted with similar deflationary pressure via upward appreciation of the yuan -- pressure they have tried hard to 'manage'. All this is going on while the American dollar stares blankly into the abyss of default. And then you come along and say, 'ah, it isn't so bad'. But it is that bad. And 'it' ends in an unstoppable inflation of prices in US dollars. And 'it' is not somewhere off in the future -- 'it' is now.