The View From 1776

Storm Ahead?

The economic barometer has been falling for many months.  Analysts have, with greater frequency of late, expressed fears of a major dollar devaluation.

Posted by .(JavaScript must be enabled to view this email address) on 02/20 at 04:57 PM
  1. I listen to the Asian news at night from Australia, Hong Kong, Singapore, ect. They often interview analysists and I have been hearing the same thing.

    I even bought some of the ETF GLD which tracks the price of gold and naturally, have been rewarded for doing so although I only have a little. I read that Warren Buffet has bet (invested) $16 billion the dollar will continue to decline.

    Other analysts here in the U.S. are telling their customers to buy the euro, foreign stocks, and gold and silver. In December more money for investments flowed out of the U.S. than in for the first time in years. Yesterday, a mutual fund tracker said that $250 billion more in mutual fund money for last month was invested in foreign funds the U.S. companies manage than in their U.S. funds.

    A lady that gives my invalid sister-in-law massages, said the home they bought last year here near Phoenix is worth $30,000 less than they paid for it due to the housing slump. In Denver the foreclosure rate is sky rocketing. That is also an area where they believe 20,000 to 40,000 homes were sold to illegal aliens using a TID to get government backed loans.

    What many people don't understand is that consumer spending and the effects of government policy take up to two years to be felt. A fed interest rate hike takes about 9 months to be felt. It takes about a year after an "inverted yield curve" before a recession hits. The yield curve reversed last Oct. as I recall and is still reversed I believe.

    Then we have the problem that the dollar is tied to the sale of oil in dollars and Iran and Venezuela are or have threatened to sell in euros which would hit the dollar. When Saddam did this just before the war, he hit our economy big time.
    So far only one OPEC country has dared switch to the euro: Iraq, in November 2000. There is little doubt that this was a deliberate attempt by Saddam to strike back at the US, but in economic terms it has also turned out to have been a huge success: at the time of Iraq's conversion the euro was worth around 83 US cents but it is now worth over $1.05. There may however be other consequences to this decision.
    That rate for the Euro is now over $1.31 and still no sign of the trend changing and that has many economists worried about the effects on our economy.

    One economist is calling for a 15 year recession. I sure hope he is wrong.
    Posted by JanPBurr  on  02/21  at  01:21 AM
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