Monday, October 25, 2010
Milford's Real "Boogey Man" Is The Dollar
Some have argued that I am a self proclaimed fortune teller of sorts, but I assure you the only skill I have is my ability to read. As an avid reader, and bibliophile I love knowledge and in my love of knowledge I have developed a penchant for economics, and economic news. As a case in point, today anyone could have read yahoo news and received a treasure trove of Economic forecasts.
Fortunately in my endeavors I also have access and opportunity to discuss what I read with many proclaimed experts. These experts include Peter Schiff, Warren Mosler, and Ralph Nader. I also have a close family friend who is an employee of the World Bank in a high level position. These individuals combined with the trends forecasts put forth by Bruce Bueno De Mesquite (who uses Game Theory) and those of Gerald Celente who does not disclose his algorithms give me a fairly accurate vision of the road ahead.
The following is a short window into what the situation looks like from my vantage point. As it stands the dollar is about to break a new all time low, and Gold a new all time high. This spells trouble for Global trade and the Dollar as the Worlds reserve currency. These issues are sternly dealt with at the G20 meetings, a place where the leaders of the worlds largest 20 economies address economic challenges. The G20 is currently growing concerned over the dollar losing its value, and Chinas response to the dollar decline by engaging in deliberate currency devaluation of their Yuan. They do this in order to keep prices cheap at Walmart, however the world is growing tired of the money game real fast.
The next few years will usher in some serious new challenges to America's austerity. The fixes put in motion by our experts are not working well enough. The U.S. economy appears to be stagnant and far too many Americans have become entirely dependent of the government for money to survive. The result of this very ugly paradox is creating large structural deficits that put pressure on the Nations "Piggy Bank" AKA the Federal Reserve.
Congress has run out of money, it has spent the entire Trillion + Dollars it collects in taxes and it has also spent all the money from everything it has sold (T-Bills). With this in mind, imagine the country still does not have enough money to pay its bills. Unfortunately, since money has been decoupled from Gold (thanks to Former President Nixon) it is easy to create and is little more than the law followed by ink and paper.
The power vested in the Federal Reserve as granted to it by the Federal Reserve Act of 1913 allows our government to engage in an enigmatic process called "quantitative easing" or a big confusing word that amounts to nothing more than printing more money out of "thin air." Congress can do this when its broke to pay for its over spending. America must never not pay all its bills and it would be unimaginable for the mighty U.S. to say "we cannot afford it."
The sad part is that we also frustrate the rest of the world when we engage in Quantitative easing because everything in the world (due to the Breton Woods Agreement) is purchased or denominated in dollars. Oil, minerals, gas, commodities etc.. is all purchased nation to nation in dollars. For example, the Banana I/you had in my/your cereal this morning was most likely paid for with a U.S. dollar that a South American grower was forced to accept.
This is the main reason why the G20 gets concerned when Americans expand their money supply (M3) because the world, who holds more dollars than the U.S., is forced to deal with the currency devaluation. Americans get a inflationary "Free Ride" on the backs of our holders of dollars. To add "insult to injury" foreign holders of Dollars are forced to collect a reprehensibly low amount of interest. A rate that is, more often than not, less than the rate of inflation we created.
Take all of this, add the LIBOR average for interest rates, Keynesian Capitalism and the manipulation of those interest rates and what we have is another solution, or in other words more affordable mortgage rates. This solution comes with a nasty side effect of angry nations who in their acrimony is rapidly demanding an ugly remedy to the induced inflation now rapidly spiraling out of control.
This will eventually end when the G20 ditches the Dollar and its associated "Breton Woods Agreement." This would also force the full brunt of our Quantitative easing to be entirely on our backs. When this happens the World will quietly divest from the dollar in favor of a new world reserve currency. Conveniently such a system has already been put in place and its called the Global SDR and is currently used for internal payments. Should a Dollar crash happen it could be expected to grow in scope relevance and size. This would be to insulate Europe, Asia, and everyone else only and not the U.S.A.
For Main Street USA and Milford Connecticut this will put cities and states at odds with the Federal Government who, in the chaos, will declare Supremacy under the Supremacy Clause of the U.S. Constitution. We will also be left helpless to defend ourselves against the economic malaise induced by our National leaders and their magnificent failures.
Still today as we speak, we have teams of economic repairmen, focus groups, and think tanks trying to solve a problem that they are powerless to solve. States and municipalities are not equipped to break treaties like NAFTA, GAFTA, EPP, and The BRETON WOODS AGREEMENT. Our states and municipalities have no seat at the G20 nor do we have any way beyond voting and complaining to save ourselves from the wrath imposed on us by virtue of the Globalist world we were sold into.
As the bailout bubble pops, so goes the easy money from the Federal Government to the states and from the states to the cities. We then get what France just got this week Austerity measures, or in other words the Middle Class gets broken as the rich abdicate and the poor remain more poor. The Middle Class will suffer the brunt of the nations Austerity measures. They will do so by virtue of higher retirement ages, less Social Security, pension funds being redirected to save banks (as happened in Argentina) and local infrastructure being sold off and privatized to keep what is left of our sustenance systems operational.
The scenario is highly probable, hopefully not in tandem with a Middle Eastern war, or with some other terrible imposition such as an outbreak of a newly discovered exotic pandemic like Swine Flu. All of this is mentioned for the sole purpose of recognizing that our Federal Government has gone awry, and as such continues to disrespect us during our time of need.
The last bastion of what keeps our economy moving is "Laissez Fare" economics or let the ingenuity of the people and our markets fix the economy. Even with that approach we are being knocked down as our trusted advisors tell us that "Laissez Fare" is not the answer because companies need to "pay up." Health care is now not a choice but a punitive "Obamanomics" imposition that will be enforced with 16,500 new IRS agents ready to confiscate individual and corporate assets to pay for insurance premiums.
Americas industry is also being told that they are harming the planet and despite all the rhetoric over climate change and the conflicting science surrounding these issues, America is slowly being forced to comply. America is alone in this compliance because as our industry is dealing with another massive Federal Imposition the biggest polluters who manufacture almost all our products are being ignored. China and India is exempt from "Cap and Trade" and our nations engineers, investors, and monetary elite know it.
Peter Wynn a casino operator correctly said that "few investors are comfortable investing in America today because their is so much uncertainty from Washington D.C." he further adds that "China and India gives their anchor Industries a long term vision and accompany that vision with political stability in order that they may make a prudent investment in jobs in their nations."
These are just a few of the emerging problems that are sending Common Americans from lost jobs to record numbers of start up businesses. They also agitate the personal insecurity that is fostering civil unrest. At no time is a record spike in Gun sales, like we saw last year, or record foreclosures a vote of economic confidence by the American public. And it is also not a vote of economic confidence by the public when they distrust their Congress by a record 89%. The nation is changing, and with those changes we are all going to feel a great deal of pain. That pain will persist, unless we as a state decide to universally reject our Federal Government and all its injurious policies and laws that hurt our citizens.
The only thing that could save Connecticut is our mutual willingness to succeed in an environment where all others have failed. We collectively need to bring about new ideas to our mutual challenges that topple all previous failed attempts. Most importantly we need to stop enabling and placating our Federal Government and its associated corrupt practices. The only way we can win this fight is with an informed educated public and leaders who have a greater desire to courageously lead rather than serve and rule.