From: Paul Grant (shade999@optonline.net)
Date: Sun Jun 15 2003 - 03:26:26 MDT
--- Dehede011@aol.com wrote:
> In a message dated 6/12/2003 11:43:06 AM Central Standard Time,
> shade999@optonline.net writes: Personally I'ld rather see the dollar
> deflate terribly than endure MORE of my tax dollars going to patch a
currently (and
> inevitably) downward spiraling dollar. They could start By allowing
other
> currencies to be used for the purchase/sale of oil, and of course, by
eliminating all
> the hard-currencies flowing out of the country for drug sales. Not
that
> Any US politician would have the balls to do such a thing.
They could start by letting states negotiate group rates for
prescription drugs for their residents. As it is, more and more people
are ordering their prescription drugs out of the country over the
internet.
Me: basically :)
Keep in mind also, the Columbian cartels and the guerrilla groups that
have many billions of dollars in the bank seem to be dumping the dollar
as a tactic of financial combat against the backer of their enemy. This
is becoming a pig pile tactic by many countries which import more from
the US than they export and don't like our "we're not a punching bag
anymore" foreign policy.
Me: I pretty much attribute the drug war to a way to keep interest rates
higher, and of course, establish the greenback as a world-wide currency.
Keep in mind that deflation is not the same thing as devaluation.
Me: Fair enough; I don't really differentiate because in my mind, the
two are fundamentally linked. Short-term effects though, do require
descriptive differentiation...
Deflation is when prices decrease (normally occurs when the value of the
dollar increases), while devaluation is when the dollar is worth less of
competetive currencies. Most of the deflationary pressure is from
falling energy prices (and prices that are impacted by energy prices).
Since energy prices were previously inflated solely due to war jitters,
this should not, IMHO, be considered a bad thing, and the deflation is
not a sign of anything systemically wrong with the economy.
The dollar, somewhat contradictorily, is also devaluing, mostly because
many countries pissed at our foreign policy are changing how their own
currencies are anchored, from a dollar standard to a euro standard. This
also IMHO is actually a paper tiger that is more likely to help us than
hurt us. It gives the French the false prestige they crave, while at the
same time inflating the prices of their exports, which will negatively
impact their economy.
Me: Agreed regarding the devaluation of the dollar (since it is in my
opinion, pumped up artificially).
With decreased demand for dollars overseas, this makes our money cheap
internationally while at the same time paradoxically of high value
domestically.
Me: cute, I didn't make this connection :) You're basically saying that
more money will flood in to our country, at the same time the foreign
imports go up in price...
similarly, inflation will rise for domestic goods because there will be
more money floating around, unless of course, the fed raises interest
rates or reserve requirements...
This can only be a good thing for the US, and will result in a return of
many manufacturing jobs to the US, especially skilled blue collar jobs.
Imports will decrease and exports will increase. The trade deficit, an
artifact of our currency being the lingua franca of international
finance, will fade from view and might even become a trade surplus. I
predict that within a decade the US economy will resemble Japan of the
70s and 80's. Consumer savings will skyrocket. A speculative bubble of a
size never before seen will occur across the entire economy, which will
last as long as people are confident that they are making rational
decisions (and so long as the facts they are basing those decisions on
remain accurate).
Me: sadly, I'm just starting out in my fiscal historical analysis :) I
don't have many years of experience watching the markets on the like;
I can't comment...
So, out of curiousity, what do you think about the housing market? I
think its going to tank bigtime, but my father is of the opposite
opinion..
My reasoning is that fundamentally, it doesn't matter how low the market
rates go, if people are unemployed and getting laid off. I personally
don't think he (Bush) is going to be able to create enough jobs... I'm
predicting there's going to be a wave of foreclosures coming within the
next
2-3 years... Especially given that the housing market is way
overpriced, and anybody who still has savings is dumping it into their
house for equity because
the stock market is so flat, and the bond market's return is so
neglible... My father is banking on the election year theory
(self-explanatory).
What's your opinion?
omard-out
PS> if you could send me a CC to my email account, I'ld be entirely in
your debt;
I won't be monitering this list-serv come tomorrow Sunday for quite some
time...
danke :)
omard-out
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