Here's an article with a different opinion from ones of most gold&silver bugs. I really like to challenge my current beliefs to be more prepared for what's coming. After reading the article, I was left with some questions. I'm interested how the US will cope with let's say 50% stronger dollar. The payments from the 18 trillion debt become 50% heavier, the tax revenues consist of 50% less dollars, which in combination is a knockout for the budget. The US companies become way less competitive on global market. And, when amidst global havok the derivatives blow up and the too big to fail banks will have to pay up (remember the 303 trillion the US taxpayers are on the hook for since dec 2014?), how will the dollar keep strenghtening if the fed will have to print money to fill ten/hundred trillion $ holes? Does this guy have a point? What do you think?
A stronger dollar would not affect tax receipts 50%. A stronger dollar would make imports much cheaper and the consumer is 70% of the US economy. Cheaper oil is also helping the US consumer. To paraphrase Mark Twain, the reports of the USDs & US economy's deaths have been greatly exaggerated.
As long as China do not become the new super power i'll be happy for the U.S to keep their heads above water.
The current obsession with U.S. debt and its likely effect completely overlooks what is going to happen before that little chicken comes home to roost. It is true that the U.S. dollar is going up, up and up simply because the debt of a lot of other countries is insanely higher than U.S. debt, combined with dead currencies walking, means the flood of capital is going to hit the U.S. shores like a tsunami. The net effect of this rise is a skyrocketing stockmarket which the government will try to tame by raising interest rates to try stem the flow of capital. This flow of capital is what will eventually turn the U.S. economy downwards as its exports are going to be hit hard. It is the exporters that will pressure the government to raise the interest rates to try gain some advantage from a weaker currency. This will amount to nothing because the point that will be completely overlooked is the fact that it is external forces that will drive the currency through the roof and the stockmarket. Too many focus on the domestic conditions....i.e. debt, unemployment etc, etc but they have been blinded by what is actually happening.
I agree with a lot of what you wrote, but consumer spending is 70% of the US economy and cheaper oil will offset a lot of any export weakness. Raising interest rates strengthens a currency, so raising interest rates would be the last thing exporters would want.
more on the topic, about raising rates http://seekingalpha.com/article/2877246-rates-dont-matter-liquidity-matters press ctrl+a on the 2nd page to read the remaining text if you don't want to register
The bigger they are, the more momentum they have. But when they do eventually fall, they leave a giant crater. Maybe future generations will be digging up the economic dinosaurs of today and wondering about the tiny brains that controlled these massive, lumbering beasts. hmmm... started to ramble on a bit there
I also hear a lot of talk about 2% inflation lately. The lead up to QE4?....... Why not make QE4 at consumer level? Rather than handing out money to banks they could just give it to consumers, this would directly increase spending and inflation thus avoid the deflation.
How long will the price of oil stay at such a low price? Will the low price of oil mean that a lot of oil companies will not be able to keep fracking for oil in the USA because it will not be economically viable and the banks that have lent billions of $$$ scramble to get their money back. IMO the price of oil is likely to go up fast again by the end of the year. If oil doesn't rise, it will mean that the world is in a recession and that will include Australia. What do SS MEMBERS THINK, up or down by the end of 2015?? Regards Errol 43
The reason I brought up this topic, is that there are mainly two ways the global crisis can go money-wise: 1)USD gets hyperinflated, BRICS bring up an alternative: Yuan/Gold-backed something/Yuan-powered SDR/whatever. Extremely favorable to PMs. 2)The USD remains the last man standing. Capitals flee to the dollar. Bad for PMs. Judging by recent american geopolitic moves, I believe they want to carry out the same trick they did in 1944 - be the only man standing, (or the last one to fall) to keep their domination. Destablilization of the Middle East, Europe (through Ukraine), Central Asia is probably next. If the dollar keeps strenghtening, it will force the foreign capital to flee to the USD and the US, it won't be a walk in a park for the US though, b/c big deflation soars debt payments, shrinks taxes etc, but maybe, there is a possibility of the US still feeding itself at the expense of the world for some time (nothing new) when the world capitals flee to them from shattering emerging markets, Europe, etc. How viable is that possibility? That's the question.
Not sure for how long, but the USD will be the last man standing. That much has become obvious in the last year. Capital is already fleeing to the USD
This last man standing thing is something I have been slowly coming around to. For so long I expected the hyperinflation senario........ untill I realised how a tiny number of decision makers direct a huge % of global wealth. Not just in the sense of the top 1% having over half the worlds wealth, but more in the aspect of the investment bankers entrusted with people's savings, pension funds etc, not to mention the CIA's meddling and its effects on foreign economies. If the USD can hold its own against the other currencies while printing at full steam then surely there is more wealth moving into USD than dollars coming from the printing presses. And its not like interest rates and QE are their only tools, surely with the US military and economic dominance they shouldnt even need to talk about jobs? Why not just have the FED and CIA work together to scare the money from any country who's currency threatens to rise back to good old safehaven USD's, re-label their QE program's as welfare.... hand it out to every level of the US economy from banks to importers, retailers to individuals and openly pillage the world with no need to work outside the consumption sector.
I wrote above that the scenario with the USD still standing will be bad for PMs. On second thought, after a lot of currencies fall victims of the supercrisis (imagine lots of currencies actually being destroyed, not like the walk in a park in 2008), even if the USD will stand its ground, mistrust in fiat currencies and fear of USD falling for the same reason other currencies will be dying (mad debt) will push some people to PMs. And the 'last man $tanding' won't be able to stand for long, in the next step, the USD hyperinflation scenario, PMs will be way more valuable.
