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alstry (34.88)

Is a Depression the ONLY CHOICE

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11

June 10, 2008 – Comments (8)

At this point, two choices.

Delfate the dollar and we have $10 per gallon gas and few Americans will have any kind of lifestyle with wages held down by international pressures.

Protect the dollar, raise interest rates, and slow the economy resulting in what could very easily be a depression by anyone's standards.

Either situation forecasts a very negative outlook. 

Right now debt load is a higher percentage of GDP than at the peak of the Great Depression.  By protecting the dollar, at least we will have something at the end of the contraction.  By devaluing, few will have anything as wages fail to keep pace with price rises.

Either way, the next year could be some of the most interesting in American History.....and maybe world history for that matter.

8 Comments – Post Your Own

#1) On June 10, 2008 at 2:28 PM, joeykid13 wrote:

yes

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#2) On June 10, 2008 at 2:40 PM, FourthAxis (< 20) wrote:

Mu Hu Ha Ha Ha!  I'll be dropping a post later about this.  Seems to be hot today.

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#3) On June 10, 2008 at 2:56 PM, jesusfreakinco (29.02) wrote:

Al,

I am afraid you are not too far from the truth.  Either it will happen sooner or later.  You have provided some great posts about the future entitlement burdens that most of us will have to face.  I fear with Dems get back in the white house, they will only accelerate the matters.  However, regardless we are on a crash course towards Ch 11 as a country.

For those that think Alstry, I, and others are crying wolf, do a google search on David Walker, former Comptroller of the US, and see what he has to say...

http://www.allbusiness.com/finance/4504369-1.html 

Got gold?  Anyone with patience will make a fortune in the gold market over the next couple of years.  Just look at what happened to gold in the 70s and things this time around are going to be much worse...

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#4) On June 10, 2008 at 4:13 PM, TMFHelical (98.66) wrote:

What about revolution?

Nah....we're too fat and lazy honestly.

Zz

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#5) On June 10, 2008 at 4:57 PM, TLStockPicks (89.38) wrote:

This confuses me.  When one mentions "deflating the dollar" that should mean decrease in price or a decrease in money supply (which would normally lead to a decrease in price).  Do you mean devalue?

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#6) On June 10, 2008 at 5:58 PM, SemperGumby77 (59.89) wrote:

JesusFreak - you wrote "I fear with Dems get back in the white house, they will only accelerate the matters.  However, regardless we are on a crash course towards Ch 11 as a country."

I don't what you base this on, but the only democratic presidency in recent memory was the Clinton administration, which cut spending and ran large federal budget surpluses- the only time in my lifetime that I've seen that happen. How exactly does that constitute an "acceleration" of what's currently going on?

As for a Depression, that might be a touch drastic. What you're more likely to see is a recession in 2009 as America works off the hang-over of the fiscal and regulatory mismanagement of the past several years. The dollar will continue to devalue, and this will have the dual effect of making foreign goods more expensive (which is bad news), while at the same time making American goods cheaper both domestically and abroad (which is good news).

Also, keep in mind that the devaluation of the dollar will eventually also eventually make the American worker more cost competitive with overseas resources, which means that eventually more outsourced jobs will find there way back to the U.S. as the playing field levels.

 The bottom line is that this devaluation was going to happen  eventually anyway as the rest of the world caught up to the U.S. 

Certainly, we've expedited that through our own fiscal irresponsibility, but eventually things will find equilibrium and the world (and the economy) will continue to turn.

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#7) On June 10, 2008 at 7:16 PM, jesusfreakinco (29.02) wrote:

Clinton cut spending - come on.  As for surpluses - Clinton was in the right place at the right time and benefited from increased taxes due to the dot.com boom - nothing to do with Clinton policies.  I agree that the weaker dolllar will help worker competitiveness, but for what industries - not mfg.  We'll not re-import mfg jobs as long as wages are 10c on the dollar in China, India, and dozens of third world countries - the global dynamics have changed IMO.  Did you ever read the book The World is Flat?

 

BTW - didn't Clinton 'balance the budget' by raiding Social Security of its surpluses just like many others before him (and GWB, too - I am not saying repubs are blameless, but at least GW made a run at social security reform before getting blamed for raping and pillaging the elderly).

What we are witnessing is a debasing of the $ to dilute our future liabilities.  Otherwise, our country would go broke quicker.  Can you imagine interest on the national debt if bond rates were twice this high or three times like in the 70s?

Exchange rates do cause the equlibrium, but we have had the extra advantage of the $ being the world's reserve currency.  I think other countries are just starting to wake up to the fact that we don't intend to strengthen the dollar significantly for a LONG time.  One day, we are going to wake up to some angry creditors knocking at our door.  All we can hope for is they continue to pour $ into worthless companies like Citigroup where we can't take the blame.  My two cents FWIW. 

Got gold?

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#8) On June 10, 2008 at 9:43 PM, GNUBEE (26.66) wrote:

Clinton administration did run a deficit, magic accounting made it appear to be a surplus. I posted a link somewhere a few days ago. So in reality, no party is better. They all are theives

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