There is much to be learned from reviewing monetary events around the world. Generally history is more enlightening than current events, however watching the yen carry trade unfold has me a bit concerned.
I'd like to paint a situation where the American public wakes up and realizes it's not in their best interest to keep borrowing and spending. The rates on the Yen are nearly zero and they are having trouble finding anyone willing to borrow the money. What if this were to happen in the US?
Step 1: China completely stops their investment in US Bonds.
Step 2: Fed has a knee-jerk reaction and lowers interest rates.
Step 3: Confidence in the dollar drops around the world and banks start dumping their reserve dollars back onto the market at an even faster, more alarming rate.
Step 4: China sees this crisis getting completely out of hand and starts cashing out their bonds to invest elsewhere.
So those sound like entirely possible events given the recent news that China has created a committee to explore and indeed start diversifying investments out of the dollar. They have been buying natural resources, including gold and silver mines, in Africa. They have been buying up land and buildings around the world. It is entirely possible that we could see this nightmare scenario in the coming months or years.
This represents a perfect storm of liquidity for the US Dollar. It represents the end of our ability to tax the world to fund our expensive government. The world is fed up, pardon the pun and aren't going to take it any more.
It is VITAL that we vote for Ron Paul. Not only does he understand this, he has the unique perspective on how to survive such an event. Smaller government is key.
Subscribe to:
Post Comments (Atom)
1 comment:
Okay, I read every post! This is // Oh, I found somebody at work who heard of Ruby and Ruby-on-Rails, he calls them. Way, way, way after my time. I quit opting for newer languages when I finally started getting good at C, and everybody else started switching to C++ ...
This is your statement that I would like to talk about:
"I'd like to paint a situation where the American public wakes up and realizes it's not in their best interest to keep borrowing and spending."
But don't you think we know that already?
My thinking is that excessive borrowing and spending are results of an economic policy that encourages the use of credit.
I think the reason we cannot get the upper hand in the struggle with debt is that economic policy gives debt the advantage.
I would like to see /* now this is original; I expect you will not have heard it from anyone else */ I would set up tax advantages for the accelerated repayment of debt, as a way to fight inflation: Reduce the quantity of money by paying off debt.
Oops, too late. We already had the crisis.
Art
Post a Comment