The national debt still increases with each passing second.
Again, So long the ability in being productive, and continuing creating wealth, the above is relative to such ability, the key is that the resources that go to service the debt, do not "crowd out" the private sector, i.e. ability to borrow, or high interest rates
There is no question that fiscal responsibility should be maintained.
Now, the minute this country moves into recession -- and, if we're lucky, it will "only be" a recession -- the deficit will again balloon due to falling tax receipts at all levels of government and increasing social outlays to mitigate economic dislocations. At best, in terms of fiscal balance, it will amount to two steps forward and one step backward. However, there is really nothing preventing two steps forward and two steps backward, or even three or four steps backward.
That is a "defeatist attitude", and it assumes an incapacity to adjust what it is needed in order to avoid, a) your proposed recession. b) any corrective measure to improve upon such event. Admittedly, the size of government is always a danger, that needs to be under constant revision and watch.
Add the potential for an accelerating increase in prices in world commodities from their current extreme low levels to the mix and a rapid decline in the dollar becomes even more certain.
Based on what ? (short to medium term).
1. Overheating foreign economies ? A = today, hardly a likely event, at least for a while...
2. Extraction/Production costs? A = I doubt it, since for starters, prices are always subject to the demand of the particular commodity, and for that, see above # 1. In addition, production costs, are lower, and overall efficiency in the process have improved, in fact, I understand that in certain commodities it has become easier to produce, lowering its production costs. therefore, increase in price of commodities, not likely for a while.
The only way another currency can become stronger than the dollar is if their economy becomes more stable and stronger than the US, or that interest rates in that currency become relatively higher than in the US.
At this time, the US faces the possibility of having to LOWER rates, not set them higher, this may lower the US Dollar against other currencies, and that is assuming the market will rush and buy such other currencies.
However, if rates are lower, than the current levels, such will be good for corporations, (and consumers alike), in turn good for equities as well. (because the possibility for better earnings increases, assuming demand for their business has not abated).
In addition, for many countries the US Dollar has become an important part of their reserves, if not their reserves already.
Where is the viable alternative ?, which country right now is attractive enough so as to switch a major portion of investments to such country, without the undue increased risk ? (from the point of view of an investor, not an speculator).
Unless the US brakes its own record of being at peace, stability provided by an open system, and a competitive environment, I simply do not see a viable alternative to the US Dollar.
Temporary and of "technical nature" the Dollar may be due for a retracement, but will it last...? and to what levels ? The answer is I do not know.
It may be that at the current levels, the dollar may be hurting some American Companies, simply because American products become more expensive..... just ask all those evil Canadians.
The real ugly skeleton in the closet will be unfunded liabilities that the US government has, Social Security and others, and to top that, the declining number of future workers, who will be supporting the increasing number of future retirees.....
Something must be done, either increased taxation, reduction in benefits or ??
For now, it is late and good night for me..... |
