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.

Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum -- Ignore unavailable to you. Want to Upgrade?

To: Haim R. Branisteanu who wrote (56734)	10/21/2009 1:26:54 PM
From: elmatador	Read Replies (2) \| Respond to of 217942

Gold may decouple from the USD: how will this work?

To: Haim R. Branisteanu who wrote (56734)	10/31/2009 2:34:53 PM
From: carranza2	Read Replies (2) \| Respond to of 217942

Most CB's are supporting the USD so as their economies should not run into a secondary dip. EU is affected most as China has a peg as are other S.E. Asia countries. How long can that game continue? This is how I see things, more or less. If this is too simplistic, I apologize. For a very long time, the global economy depended in great part on the American consumer, who was using his home as a credit card to buy plasma TVs, granite tops, foreign cars, monster SUVs, etc., all of which he could not afford but for the availability of the residential credit card. Wall St. found a way to sell the debt created by this orgy of unaffordable consumption to the unwary. It exported toxic debt grenades at a substantial profit. You know the rest. The world has yet to find a substitute for the American consumer. He is unemployed or facing loss of a job. If he is employed, his wages are stagnant or declining. He is underwater on his mortgage debt, his credit card debt is huge, etc., and he is quite reasonably focused on paying off debt. His residential credit card has been cut off. Many of his fellow citizens are bankrupt. In short, he has no credit on which to fund the level of consumption which gave us 'prosperity' and fed the fantasy that the globe was on an economic tear, with the Asians exporting and the US consuming. Even if he wanted to spend, the banks, which are hugely liquid thanks to the injections of capital ultimately funded by the same American consumer/taxpayer who kept the global economy going for so long and who made bankers wealthy beyond the dreams of Croesus, are not returning the favor by lending him cash. The heart of the global economy, a very big customer, is no longer buying. The idea that we can return to the levels of phony prosperity we saw before is a joke. Who will replace him? Who has the numbers? The Chinese do, and so do the Indians. But, and a big but it is, they do not have nearly the per capita income which is required, nor do they have the residential credit card which was available to Americans. It is in this light that I see the efforts of foreign CBs to support the USD as stupid and a waste of money. I think of the CBs as using a beach umbrella to defend against a tsunami. There will be additional stimulus responses in 2010 in order to avoid further deterioration; these responses will further devalue the USD. Nothing foreign CBs can do will have the impact that continued measures to stimulate the economy will have. What foreign policymakers need to do is stimulate internal demand by raising wages, building infra, etc. In short, replace the US consumer as the engine of global economic growth or at least become less dependent on him. Until we take steps to put our industrial base and our fiscal and foreign trade houses in order, supporting the USD is a losing proposition in the long term. Foreign CBs have a finger in the dike, but they cannot fight the trend. Ultimately, neither can the Fed nor the Treasury. We are all screwed, but the poorest countries will be screwed hardest.