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Global Update — Preparing For A Weaker U.S. Dollar

April 21, 2011 by  

Global Update — Preparing For A Weaker U.S. Dollar

The global economy is in a state of stabilization rather than normalization and despite the various negative events in the first quarter (earthquakes, Japan, Middle East) the global economy is still set to grow at a rate of about 4.5 percent this year, only marginally lower compared to 2010

However, global economic growth is very unevenly distributed these days and emerging markets are growing much faster than developed markets like the United States and Europe. Emerging markets are expected to grow about 6.5 percent versus only 2.5 percent for developed markets.

In its recent update “World Economic Outlook”, the International Monetary Fund (IMF) writes that global growth has been gathering momentum in the past few months and that the economic recovery has broadened. Also, the IMF thinks that the risks for a renewed global recession have diminished. It also thinks that the sharp increase in commodity prices is not a real problem for the global recovery. In their view, even an increase of oil up to US$150/barrel would only lower global growth by about 0.75 percent.

The IMF, on the other hand, is concerned about the increasing debt levels of the U.S. and the fact that there has not been enough done to address the problem of rapidly rising debt levels. While we share some of the views in this latest IMF report, our own outlook is more negative and we think that the state of the global economy is still more fragile.

We continue to see higher growth rates in emerging markets that will offset at least some of the lower growth in the Western world, but in our view the outlook for emerging markets is a lot more uncertain. There are a number of factors that could impact growth in emerging economies very negatively.

We also can’t share the IMF’s view on commodity prices. In our view, rising commodity prices are a much bigger problem. While the fundamental supply/demand relationship is clearly supporting higher prices, the increasing share of speculative investment money that has come into the sector is creating new problems. The rapid increases among all sort of commodities has led to a very broad increase in global food prices.

An increase in food prices has a very direct impact on disposable income. Today we are seeing a growing number of people getting pushed to the limits because of higher food prices and that is, among a few other factors, contributing to political changes like we are seeing in the Middle East right now. These changes can have far-reaching implications in coming years, not only to the Middle East, but to all major economies in the world.

We think that the global economy can grow about 4.5 percent in 2011 and 2012. That is a very realistic assumption, but the fact that today we are dealing with many economic imbalances today and a much higher degree of interdependence among major economies is increasing the risks for the global economy.

The main risk factors are obvious. With the Western world experiencing sluggish growth and growing levels of debt, painful adjustments have to be made eventually. We think that it is highly questionable that the ongoing loose monetary policies among most major markets can bring these economies back to the growth levels seen historically.

Higher economic growth in developing economies is in sharp contrast to the very moderate growth in developed markets and there are also growing imbalances between them, mainly due to the fact that developed markets have been increasing government debt very significantly in recent years while emerging economies have been able to reduce their debt in the last decade.

The following two charts illustrate the current trends of debt levels and deficits in developed economies and in emerging markets:

Developed Economies

Developing Economies
Source IMF

 

Emerging Economies

Emerging Economies
Source IMF

The charts show that the situation in the U.S. and in Japan is bad and about to get worse. While most countries in the European Union have finally started to address the debt problem and the trend for them is improving, it might take many years to turn things around. The big difference between the U.S. and Japan is that the U.S. has a much higher percentage of the debt financed by foreign investors, as the following chart shows

Net Percentage Of Debt Held By Non-Residents

Net Percentage Of Debt Held By Non-Residents
Source: IMF

While the U.S. continues to increase the debt burden, emerging nations like China are accumulating foreign currency reserves and are reinvesting them in developed markets, a large part of it in government debt securities such as U.S. Treasury bonds. This can’t go on forever and it is clear that emerging markets are increasingly concerned about reinvesting their reserves in U.S. Treasury bonds. Actually, these investments are already declining.

While the attempt to provide the domestic economy with ample liquidity is certainly understandable, it is giving the wrong signal to foreign investors. And it comes at a time when the need for foreign investment is bigger than ever.

The Federal Reserve in the U.S. is currently trying to stimulate the domestic economy and to create jobs by providing the market with a lot of liquidity. We don’t think that liquidity alone will create jobs. In our view, the fact that job creation has been so disappointing has to do with a number of structural factors that are much harder to correct.

Politicians and central banks will most often do whatever serves them best, and when you have so many people looking for jobs and being unemployed, it’s natural that this is a top priority. However, by creating excess liquidity and therefore forcing a devaluation of the currency, the ultimate consequence is inflation. I think we are currently in the first phase of this development. This is going to get worse in coming months, and probably years, and we will hear and read about it much more in the future. Inflation will eventually become a much higher priority item and therefore policymakers will gain much more by fighting inflation.

Here history repeats itself. In the early 1980s, inflation was by far the biggest problem, peaking at more than 13 percent in 1981. The fight against inflation began in the late 70s with the appointment of Paul Volcker as the chairman of the Federal Reserve. He raised the Fed Funds Rate to 20 percent against widespread protests.

But inflation eventually began to slow and it fell back to about 3 percent in 1983. It was a matter of setting the right priorities at that time. Yes it was painful, but it was a much-needed measure. The economy began to recover and returned to healthy growth for much of the 80s.

In light of the lessons from the past, it is obvious that the current Fed strategy is not sustainable in the long run. However, even if rates eventually start to go up, we think it is highly doubtful that the value of the U.S. dollar will go up significantly. I think it might only devalue at a slower rate.

Remember, even in the last few weeks with all the negative events in Japan and the Middle East, the U.S. dollar has not benefitted. Historically in times like this there was always a flight to security, and that was usually positive for the U.S. dollar. But now not even all the bad news helped the greenback.

This should have been big headlines in financial news, but it wasn’t. However, it is a further sign that the U.S. dollar is about to lose its status as the world’s main reserve currency which will cause a large rebalancing of currency reserves in coming years.

The world has become increasingly aware of the declining status of the U.S. dollar in the last couple of years and it seems like the world is now accepting a weaker U.S. dollar going forward. This is a real game changer with far-reaching consequences for investing.

Daniel Zurbrügg

is the Managing Partner of Alpine Atlantic Global Asset Management, a Swiss-based independent investment management firm. The firm provides clients with independent investment management, asset protection and family office services and is the issuer of the global investment newsletter Echo From The Alps. With a global network of partners, Alpine Atlantic's aim is to provide clients with true "turnkey" solutions for global investing. Prior to setting up Alpine Atlantic, Daniel held various positions with other banks and financial companies. Daniel is a Chartered Financial Analyst and regular guest speaker at international investment conferences.

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  • Richard

    Liquidity can’t create jobs as stated. Why would anyone try to compete with our free trade partners when it simply isn’t possible to – even at minimum wage levels? They can try but failure is the result. Too much BS everywhere. Free trade has always destroyed economies that began on top throughout history.

    • homeboy

      this country is being hung out to dry. however we consume so much of the worlds products that when we fail eveyone will fail eventually. japan and china will be the hardest hit by our down fall. so do you think man still has the answers?

      • homeboy

        one other note of interest, the university of texas has just purchased $1 bllion worth of gold and will store it on campus. whats up with that?

        • Al Sieber

          Because they don’t believe in paper money.

          • homeboy

            yes but its a college. what will they do with it when money goes worthless . the average person,maybe 200million peolpe , are not buying gold or silver. so how will they purchase products ? and how will companys purchase products to sell if they have no gold or silver? see gold and silver will also be come worthless because everyone will not have it to use.

          • Al Sieber

            Well homeboy, I’ve been mining gold and silver for over 34 years and never had a problem selling it, trading it etc. I was mining it when it was $60 a ounce and thought that was good money. we’re conditioned not to buy gold and silver and trust in the counterfeit paper that they print up and pass as money. paper money has never lasted in any society, it eventually becomes worthless.

          • Richard Pawley

            Gold is simply a store of value. The University of Texas simply doesn’t want to lose what they have. The world is not likely to end when our economy implodes from within but it will be greatly changed, the greatest change in 500 years, maybe 1,500, but the irresponsible spending of the 110th Congress and now the 111th will surely make it seem like the end of the world. Those who have money buy gold. The rest of us would do well to be sure we can feed ourselves and that is why so many are buying freeze dried food storage that will last for decades. Already there is a shortage across the land in some things in this category and this was before the earthquake and tsunami in Japan. Many Christians are convinced that we are in the beginning of what the Bible calls the “end times” and there is some good evidence for that. What you can count on in this decade though is prices tripling and the rate of real inflation (things we actually use and not the government’s theoretical inflation) seems to be speeding up. Hopefully, the full damage to all this irresponsible spending won’t result in more than prices going up 250% before the coming election but it could be worse. I know it’s not popular anymore but the old boy scout motto used to be “Be Prepared!” Those who will not will only lament that they did not. May God help us because the government and the banks cannot do so without creating the very inflation that is going to affect everyone. I think my next book may be on how an ordinary person can survive what is coming. Some will not.

          • JC

            homeboy says:
            April 21, 2011 at 9:13 am
            yes but its a college. what will they do with it when money goes worthless . the average person,maybe 200million peolpe , are not buying gold or silver. so how will they purchase products ? and how will companys purchase products to sell if they have no gold or silver? see gold and silver will also be come worthless because everyone will not have it to use.
            ___________________________________________________________________

            They will probably end up dead. Which is what they are meant to be.
            the “powers that be” have every intention of culling the herd.

        • DaveR

          Just a wild guess — getting ready to declare independence of the Lone Star State from USA? Or just savvy planning for the coming crash of the US dollar?

        • Cawmun Cents

          Perhaps they need bribe money for La Raza when they show up to take over.Either that or they are going to contribute to the DNC…haw!

          • Bus

            interesting point, They are Texans, but it is a University?

        • Vigilant

          homeboy,

          They’re not storing it on campus. Accoeding to http://blogs.forbes.com/robertlenzner/2011/04/17/university-of-texas-endowment-holds-1-billion-gold-5-of-its-portfolio/ , the purchase is “in actual bars of gold bullion in a New York bank vault owned by HSBC Holdings, the London based global banking institution.”

          • Vigilant

            Additionally, it’s only 5% of the university’s endowment portfolio.

        • JC

          Al Sieber says:
          April 21, 2011 at 9:30 am
          Well homeboy, I’ve been mining gold and silver for over 34 years and never had a problem selling it, trading it etc. I was mining it when it was $60 a ounce and thought that was good money. we’re conditioned not to buy gold and silver and trust in the counterfeit paper that they print up and pass as money. paper money has never lasted in any society, it eventually becomes worthless.
          ____________________________________________________________________

          Take a look at this Al,
          Four major economies are no longer trading in the world’s “reserve currency”,the US Dollar. That would be because it is becoming completely worthless, and other nations are beginning to abandon it.
          And those who do not have something prepared…are going to be in a very bad way. Check it out:

          Emergency Alert USD – April 2011

          BRIC Nations Not Using US Dollar for Credit Transactions – BRIC is an acronym referencing the nations of Brazil, Russia, India and China. It is sometimes referred to as BRICS with South Africa added in at the end. I do not think South Africa is significant economically but it is grouped in there anyway. The combined economic strength of these nations is massive. It dwarfs the USA. Just think of the population of India and China alone. These nations account for 40% of the population in the world (3 billion approx.) and 20% of the World Domestic Product. The BRICS nations hold 40% of the world currency reserves most of which is in USD. BRICS is a serious group of players.

          What Did BRICS Nations Do – Well they signed an agreement to use their own currencies instead of the US Dollar in issuing credit or grants to each other in commerce. Let’s see their own statement:

          “Our designated banks have signed a framework agreement on financial cooperation which envisages grant of credit in local currencies and cooperation in capital markets and other financial services,” Manmohan Singh told reporters at a news conference with other BRICS leaders.” Thus the death certificate for the USD has been signed. It will take some time for Rigor Mortis to set in.

          Who Signed This – The agreement, the first-of-its-kind, was signed at the 3rd BRICS summit here attended by Indian Prime Minister Manmohan Singh, China’s Hu Jintao, Brazil’s Dilma Rousseff, Russia’s Dmitry Medvedev and South Africa’s Jacob Zuma. This is quite a cast of characters.

          Mainstream Media Blacking Out this Story – Let me prove this to you:

          http://www.panamalaw.org/emergency_alert_USD_April_2011.html

    • DaveH

      Richard,
      Free Trade is not the destroyer of economies. Big Government is. As long as people are distracted by Red Herrings such as the “dangers” of Free Trade, Government can keep getting away with its profligate ways. We could stop all trade with other countries, and just watch our domestic industries get fatter and lazier as our consumer prices escalated. Protecting people, whether individuals or companies of individuals, from failure and competition always results in the same thing, less productivity and higher prices.
      Big Government is the Problem. I’ll show you mine (results of Big Government):
      http://heritage.org/index/ranking

      Now, show me yours.

      • Richard

        I have tried Dave – you are not educable. For what reason could Americans not compete with Americans? We have free markets – so they certainly can.
        You showed what? A chart of who allows more free trade. To what end do you show it? Without explanation it is worthless. The countries ranked higher than America are what? We covered this before – Australia is moving into being a service economy with declines in real production and a big current account deficit and increasing free trade(sound familiar?). They can survive a while longer because they have something to service. We have became a service economy but have about lost about all there is to service. A service economy cannot survive unless it services a larger economy. Hong Kong is on top because they service many economies. We would have to decrease wages to a point that would cause immediate rioting to compete for servicing other economies.
        Do yourself a favor Dave and put two charts (1990 to present) side by side – increase in free trade vs. growth or increase in free trade vs. wage growth or increase in free trade vs. goods produced or increase in free trade vs. savings or increase in free trade vs. inflation or…… maybe enough real facts will get through your numb skull though I seriously doubt it.
        And so many arguments are without merit just as yours are: NAFTA created a lot of exporting (lie) – most of the exports are car parts that come back here in the cars that should be built here so +1 export -1 import = ZERO, Americans will have to be inventive and grow with new inventions (hardly) over 30% of China’s economy is based on the violation of intellectual property rights, and the idiots saying free trade is good are the same idiots that were telling us in the early 80s that government deficits were good.

        http://www.wise.xmu.edu.cn/Labor2010/Files/Labor2010_GordonHanson_Paper.pdf (impact of import competition on US local labour markets that were differentially exposed to the rise of trade with China in the 1990-2007 period)
        Excerpt:

        “Increased exposure of local labor markets to Chinese imports leads to higher unemployment, lower labor force participation, and reduced wages. While the employment reduction is concentrated in manufacturing, wage declines occur in the broader local labor market, and are most pronounced outside of manufacturing. Growing import exposure spurs a substantial increase in transfer payments to individuals and households in the form of unemployment insurance benefits, disability benefits, income support payments, and in-kind medical benefits. These transfer payments are two orders of magnitude larger than the corresponding rise in Trade Adjustment Assistance benefits. Nevertheless, transfers falls far short of off-setting the large decline in average household incomes found in local labor markets that are most heavily exposed to China trade.”

        • DaveH

          No, Richard, you are not “educable”. The ranking, that I linked to, compares the countries with the least Government involvement in their economies to the countries with the greatest Government involvement in their economies. That is real world experience for ignorant people like yourself who have bought into the Siren Song of Protectionism.
          And NAFTA is a poor example because Free Trade using Government panels is an Oxymoron.
          What would happen if you could only buy products made by your own family members? Of course that is extreme, so let’s expand the base.
          Let’s say you are limited to your own city. A much bigger set of people and skills, but do you really think you could find all the products you need or desire in that limited demographic?
          Even if you were only limited to your state, you would still find it very difficult to find all you desire at a decent price and quality.
          People have different skillsets. It behooves us to use those skillsets across the whole world rather than to limit ourselves to only those that exist within our own country.
          You get my drift, Ignorant Richard, or do I need to dumb it down to 8th grade level?

          For those who actually want to think and learn, here is an excellent treatise of the causes of the Great Depression. Let’s not repeat history:
          http://mises.org/rothbard/agd.pdf

          • Richard

            I notice the lack of comment on REAL data – the charts I referred to. Trump got it right saying that economists and their theories are idiotic. And this Austrian theory crap you link to certainly has persuasive wording and an intellectual candy flavor, but so do many theories that lack substance and REAL data for the topic at hand. NAFTA is free trade and it has hurt us bad, even with the government safeguards.

          • Richard

            Definition of EDUCABLE
            : capable of being educated; specifically : capable of some degree of learning

          • DaveH

            I showed you the most dramatic proof one could ask for, dunderhead, and that is the actual results of Big Government meddling in the economy.
            But some people have vested interests in promoting policies that favor their special interest, such as Union members, Government power-brokers, or Crony Capitalists. Which of these categories do you fit in, Richard?

            Ignorant: destitute of knowledge or education

          • Richard

            Theory isn’t proof but I understand your lack of knowledge in that arena well.

        • DaveH
          • Carlucci

            John Stossel rocks.

          • Richard

            There is no reason to not trade with others. There is no reason for tariffs on goods we can’t make or produce – like coffee for example. Protecting your markets like we used to worked, remember the 1950′s? We came from depression and war and became an economic super power. We protected our markets. And guess what? We had coffee.

          • DaveH

            Oh, wow, what convincing proof Richard offers us.

          • Richard

            It is extremely easy.

        • DaveH

          Cato weighs in on Free Trade:
          http://www.cato.org/pubs/tbp/tbp-028.pdf

          • Richard

            This is the worst kind of BS.
            Like: …”international trade restrictions are
            costly to consumers as well as producers.” and of course Americans can buy things cheaper without trade restrictions, many with their welfare check since those goods they bought cost their job.
            Like: …”Global elimination of all barriers
            to trade in goods and services would raise
            global income by $2 trillion and U.S. income
            by almost $500 billion.” and of course some major corporations that are benefiting can increase income but nothing about the fact that it is on the backs of most Americans. (I linked you to a REAL study, the one with the excerpt:”“Increased exposure of local labor markets to Chinese imports leads to higher unemployment, lower labor force participation, and reduced wages. While the employment reduction is concentrated in manufacturing, wage declines occur in the broader local labor market, and are most pronounced outside of manufacturing”)

          • DaveH

            People implemented Richard’s policies in the 1930s, and surprise, surprise they brought us 10 years of Depression.
            But, oh, that isn’t enough for Richard. He wants more of the same.
            Thank God that there are still enough intelligent people out there to stop his kind.

          • DaveH

            You can link to any biased study that you like, Richard. But fortunately most of the people on this board have enough sense to know that limiting our choices will only enrich special interests at the expense of the rest of us.
            Isn’t it you same Liberals that wrung your hands about supposed Monopolies (of course they can only exist with the force of Government), and why? Because they would drive up prices and create a shortage of goods, absent competition. Now, you same Big Government Loving Liberals want to stifle competition, but now it is good to stifle competition because it benefits you.
            Like I said, Richard, most of the people on this board can see right through your kind.

          • Richard

            Well I actually enjoy watching you being full of yourself. Yes, I am 100% in the corner of a special interest: most of America. Free trade benefits a very small percentage of Americans. People implemented “Richard’s” policies until the late 1990′s nincompoop.
            I really enjoy your idea that Americans can’t compete with Americans. Of course they can – which shows who your special interest group is: foreigners and multi-national corporations that make money off of cheap foreign labor in OUR market.

          • Richard

            I extremely enjoy how you turn a “factual” study into a “biased” study in your mind. Funny how you always link to and talk about theories and refute real facts.

            Diluted: DaveH

          • JC

            So in summary Richard, you are 100% pro statist, correct?
            ALL solutions come from the omnipotent and benevolent Government and we should all just go back to sleep because BIG BROTHER has everything under control.

            Does that about size you up?

    • Vigilant

      The article says, “emerging markets are expected to grow about 6.5 percent versus only 2.5 percent for developed markets.”

      We need to be careful with statistics. Emerging economies and markets almost always grow faster than developed economies, regardless of the world situation. Reason: simple mathematics.

      A country with a large GDP will necessarily grow slower because the denominator in the growth equation is so much larger. For example, a developing economy might grow by $100,000 annually, but has a GDP of only $1,000,000, so the growth is 10%. The developed economy grows by the same whole dollar amount ($100,000), but its GDP is $10,000,000, so its growth rate is only 1%.

      As emerging or developing economies increase their GDPs, so too do their growth percentages normally decrease.

  • David

    Trump said he would Trump China….Right. It’s not only currency devaluation that we compete against (and we are now also doing the same) but more so our own government has regulated out of competition. I sit on a few tech committees which set world standards for for like manufacturers. As we try to level the playing field all we here from China is the EPA & OSHA standards do not apply to us….”so back off”. This lets them produce more product with much higher amounts of pollution per ton of product than we do.

    So QE2, maybe QE3 followed by massive inflation will hurt us not them. $6/gal gas this summer? Food prices soaring? Oh yea these are no longer inputs in the inflation calculation. I think the high inflation is already here.

    Buckle up folks-we’re in for a very hard landing. It’s time to put some people in DC that can bring change we can believe in :0)

    • http://www.loringcorp.com Charles Wilson

      An uninformed and not well educated commmenter.. check the spelling of the most simple words.. This is a Muslim terrorist.

      • David

        Go after spelling errors instead of the content. Sorry engineers need spell check because they think faster than they can type…..A-Hole

        • Conservative at Birth

          My sentiments exactly.

        • http://Illinois'17th Old Henry

          David!

          It’s not your fault!

          It’s the keebord.

        • DaveH

          David,
          Your comment was right on. Ignore the Liberal.

      • http://Illinois'17th Old Henry

        Barry Soetoro is posting on this site?!

        As the late Harry Carey would say: “Holy Coowww”!

      • WayneT

        Amen, Amen & another Amen, to this, David. Just think there are still idiots supporting this Idiot Obama. Boy! are thy going to be in for a big surprise. Then we’ll be able to tell them, I told you so, you dummy.

    • Al Sieber

      I agree with you on that one David, I’m thinking more like $10 gas.

      • David

        If the administration would even announce that offshore drilling restrictions were going to be lifted or we were going to open up Alaska’s huge reserves…..we would see gas prices drop like a rock due to speculation. It’s psycological

        • http://Illinois'17th Old Henry

          David:

          That will not happen as it goes directly against Der Fuhres’s plans for our nation and its people.

        • WayneT

          That is exactly what I have been hearing also, David. Will the idiots that support Obama’s policies willing to pay that much per gallon?

      • http://Illinois'17th Old Henry

        Al:

        If that happens I will have a lot of company on my walks into town and back home.

      • Richard Pawley

        Al, chapter four of my book, “THE LAST DAYS OF THE LATE GREAT UNITED STATES and the Great Famine that Followed” was “Gasoline or Milk, $10 a Gallon”. Now one of the top investment advisors who has upwards of 100 analysts working to make him richer have concluded that milk could reach $10 a gallon – as I said – and gasoline could reach $11, and still the EPA will not allow the super clean small diesel cars so popular in Europe which get 70 to 80 miles per gallon, some of which can carry five people, to be sold here. The reason is that there is an agenda and it is to cripple the USA by whatever means, so that the NWO can be established. George Soros who funds moveon.org and more than a hundred other left wing organizations in this county has said that we are in the way of his plans for the USA and only the congress can stop it. Since many seem to be support his ideas that is not likely. Glenn Beck found out about the power of money when Soros sent two guys to Fox News to tell Beck to layoff his exposes which the government media (ABC, CBS, and NBC) mention little or nothing. Beck is a nice guy, to nice to admit it but I suspect that is the real reason why he will be leaving Fox when his contract is up. Democrats and Republicans alike don’t like his revelations of all their wrong doing and those who want a NWO surely don’t. “May you live in interesting times” was the ancient Chinese curse and we certainly do, AND they are going to get a whole lot more interesting. The next 36 months should be some of the most amazing in history.

        • Al Sieber

          Well Richard, how can I get a copy of your book?

        • kkflash

          RP, I haven’t read your book, but I suggested the same thing you do on this blog several times in the last 2 weeks. BO’s admininstration is acting contrary to what is good for the US economy and they know it. They are intentionally trying to bring about economic collapse and the ensuing pain on the common people in order to further government dependence and to open the po’ folk’s minds to a new form of, presumably socialist, government.

    • Bert Cundle

      Well; Dave: See the Results of COMPETITION Between Capitolism & Communisiam? Commies can Do it CHEEPER!!! Commies, Woork best on LOW INCOME! See where we are headed? & WHY???

      • David

        Yea and our communist party aka unions make our products even more expensive than they need to be which only exacerbates our problem. We need to make public unions illegal so our children can be taught by good teachers instead of a tenured slacka$$.

        • Bert Cundle

          You Deffinetly “DON’T” See the Problem, or solutition! The winner is the “BETTER” Commune! [ A.F.of L. / C.I.O. is the BEST!] When Working RIGHT! With-out UNION BUSTERS Overpowering, the ORG.! i.e. Government!

          • David

            Those unions’ days are numbered and they know it. BC you are so lost and confused. You need a nice dose of Special Reports this evening. Don’t think you could handle Cavuto or Beck…..

          • kkflash

            Your post above appears loaded with jibberish, but I tried to understand you anyway. So, I think you’re saying that if we allow the unions to continue to coerce businesses to pay them wages and benefits that aren’t competitive on world markets, that somehow our products will become more comptetive on world markets. Is that the gist of your statement?

      • DaveH

        Bert,
        Are you trying to be funny?
        The United States GDP per Capita: $47,400
        China GDP per Capita: $7,400

        China’s per capita income is still below the world average. Why do they have so much money? Because their population is 4 times the size of ours. Get it?

        • David

          Nailed it. Good night B Cundle

        • Bert Cundle

          HOW CAN OUR 2009 G.D.P. BE THE SAME AS OUR NATIONAL DEBT IN 2011 ????

          • DaveH

            Why is the sky blue?

  • http://www.loringcorp.com Charles Wilson

    Sir/Madam;

    The path that is currenting being persued by the U.S. Administration, and the Fed Chief, appointed by Obama, is a recipe for desaster. We will not just have “inflation”, we will have the most severe “stagflation” that it will be decades, likely 40 years, before the nation can truly recover. It is more than apparent that the President, and, his “Czars”, are either grossly incompetent (look at a President who has never had a real job, and who is not only a Muslim, but a Communist , who has appointed virtual “children” to further Socialize our nation, and it’s entire system and tier of Agencies. IF the people do NOT step up to the plate NOW, and stop this, the momentum will soon overtake and and all production (what little we have leftA) and this nation will become a Military Industrial Dictatorship. It is inevitable, UNLESS Americans take their government back, quick! Obama is a Muslim Communist, invoking the Lord God, Jesus Christ, as a means of disarming the people and, thus, allowing not only the coimmunism of medical care, but trashing the entire content of our Constitution; all of this, while Amereica sits on its ass and watches Dancing With the Stars. Sickening. Disgusting and vile.

    • JIBBS

      Look at your own spelling errors, we all make them.

      • Conservative at Birth

        How about typo errors? Yes, we all do make them.

      • Bruce D.

        Every time I have seen someone criticize another’s spelling or English grammar it has always comes back to bite them. It’s funny in a way.

  • H. Kirk Rainer

    Nothing was directly mentioned about war — its effect on inflation, the economy…empires, etc.

    • Vigilant

      Nor was anything mentioned about the inordinate level of welfare spending – its effect on inflation, the economy…nanny states, etc.

      • Bruce D.

        Borrowing and/or printing money is the end product of welfare and socialism. The American socialism we have today cannot exist purely on productivity alone. Tax the rich is the Marxist mantra but that is a short lived game also ending the same way – borrowing and/or printing money. It is the only way to extend the length of time and benefits that leftest are envious and so vehemently demand. It is inevitable that socialism will bring about a lower standard of living for all and debasement of individuality.

      • Richard Pawley

        Or that “our recovering economy” has millions more on foodstamps now than when Obama and the Democrats took over in 2006 and 2008. They must know their policies can only create government jobs and a few making windmills and solar panels (but the Chinese do both much more cheaply).

        • Bruce D.

          Exactly, Obama claims green jobs will be created but the stimulus money given to Texas was spent on wind turbines made in China. I do not see how anyone can possibly buy into green jobs.

          • WayneT

            Only idiots, imbeciles and incompetant people can do that, BruceD. The green crap will not give us plastic, asphault roads, asphault shingles, and over 125 other products we derive from the derivitives of oil that we take for granted ever day. Obama is a dud, but he still has his moron followers.

      • kkflash

        It doesn’t matter what kind of spending it is, if government is doing the spending, then it’s unproductive for the economy. Every dollar cycled through government returns to the economy as 60 cents because 1)government is bureacratic and inefficient – the private sector does everything better because of competition and motivation. 2) government produces nothing – no products, no useful services (unless you count wealth redistribution; I don’t)

  • http://www.wakeupwomen.com Karen

    Washington DC is a corporation, and our government is a de-facto government. We do have a way out, but we are going to have to stand up as we the people; in order to form a more perfect union that is not put on the backs of the citizens. I say we get rid of them all, and put in place the Republic government that is waiting in the wings funded and ready to step in just as soon as this so-called bunch is out.
    Remember when OBAMA said Change we can believe in. Change is the only thing that really is holding any value. Save your Pennies, Dimes, Nickels, and Quarters half dollar and dollar coins. As the US dollar continues to plummet your change will have more purchasing power then the Dollar. And something tells me that we need to be aware enough to prepare. We are in a mess and we just need to look around at our lives and seek to find whatever it is that is not in moderation, and begin to change each and every household.
    The game is over when everyone quits playing because there is no way to win. We as Americans who have pledged our allegience to the United States of American and to the Republic for which it stands one Nation under God with libety and justice for all.
    We have to occupy the republic that has been left vacant since Abraham Lincoln and there after.
    We the people are not their slaves, and its up to us now… Its time to Wake up…

    • Vigilant

      “Washington DC is a corporation, and our government is a de-facto government.

      Wrong. The District of Coloumbia is incorporated as are thousands of US cities and villages. The US government remains a Constitutional Republic.

      The Team Law website is full of wrong assumptions and lies. The Organic Act of 1870 changed nothing about our form of government.

      • Vigilant

        Make that “Columbia.”

      • Andre

        “The Organic Act of 1870 changed nothing about our form of government.” Well that maybe didn’t, but the bankruptcy of the US because of which Roosevelt had everyone turn in their gold and silver after the birth of the “Creature from Jekyll Island”, AKA Federal Reserve Bank, surely did!

        We have been in bankrupcy for decades, with the international bankers as the receivers!

        United States Congressional Record, March 17, 1993 Vol. 33, page H-1303
        Speaker-Rep. James Traficant, Jr. (Ohio) addressing the House:

        “Mr. Speaker, we are here now in chapter 11.. Members of Congress are
        official trustees presiding over the greatest reorganization of any Bankrupt entity in world history, the U.S. Government. We are setting forth hopefully, a blueprint for our future. There are some who say it is a coroner’s report that will lead to our demise.”

        It is an established fact that the United States Federal Government has been dissolved by the Emergency Banking Act, March 9, 1933, 48 Stat. 1, Public Law 89-719; declared by President Roosevelt, being bankrupt and insolvent. H.J.R. 192, 73rd Congress m session June 5, 1933 – Joint Resolution To Suspend The Gold Standard and Abrogate The Gold Clause dissolved the Sovereign Authority of the United States and the official capacities of all United States Governmental Offices, Officers, and Departments and is further evidence that the United States Federal Government exists today in name only.

        The receivers of the United States Bankruptcy are the International
        Bankers, via the United Nations, the World Bank and the International
        Monetary Fund. All United States Offices, Officials, and Departments are now operating within a de facto status in name only under Emergency War Powers.
        With the Constitutional Republican form of Government now dissolved, the receivers of the Bankruptcy have adopted a new form of government for the United States. This new form of government is known as a Democracy, being an established Socialist/Communist order under a new governor for America. This act was instituted and established by transferring and/or placing the Office of the Secretary of Treasury to that of the Governor of the International Monetary Fund. Public Law 94-564, page 8, Section H.R. 13955 reads in part:
        “The U.S. Secretary of Treasury receives no compensation for representing the United States.”

        • Richard Pawley

          “If the American people ever allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive he people of all their property until their children will wake up homeless on the continent their fathers conquered.”

          This quote from Thomas Jefferson in large letters, takes up all of page 81 of my last book. It’s taken longer than Jefferson imagined and will likely be fulfilled far sooner than most reading this can imagine. In that sense these really are ‘The Last Days…”

        • Vigilant

          The “Sovereign Authority of the United States” is still intact. You may want to refer to http://www.tapesite.com/index17.html The key is that HJR-192 was a RESOLUTION, not binding law.

          As Kevin mentions in the article, “Please do your homework and think outside the box before disseminating patriot mythology to others, possibly causing them to stumble by your lack of research and knowledge. If you wish to continue arguing this ridiculous allegation without doing your homework, i.e., refusing to spend the time required in studying the monetary system in detail, please do so privately, not on any public forum, so as not to mislead others with such mythology.”

          • Vigilant

            Incidentally, would you be so kind as to provide the specific provision of the EMB that the “United States Federal Government has been dissolved?”

            Ridiculous, unfounded claims such as that have no place in a reasonable discussion unless you can back them up.

    • Tom S

      Well said but it won’t do any good, the sheeple will perish because there’s no stomach for a fight.

  • http://www.wakeupwomen.com Karen

    I proofed my post and still has spelling errors….

  • http://www.easyinvest.co.za peter

    Perhaps someone can explain to me why the declining dollar, the debt and deficit crisis still persist when the USA has the soveriegn right to print dollars at will?

    Surely then the USA can never renege on her debt or be bankrupt! Somehow nothing adds up anymore and no one has an answer.

    • Vigilant

      Please research the history of the Weimar Republic.

      • Tom S

        Too true. At the zenith of their decline, a loaf of bread cost one million Marks. It won’t be long and prices will be just as outrageous in this country given the leadership (or lack of) that we have now. Comrades Obama and Holder ared well on their way to spreading communist rule and policy in this country and hardly anyone is doing a thing to stop them.

        • Richard Pawley

          I have a stamp collection with only two stamps in it. They are worth nothing but they are priceless. Both from Germany. One is from 1921 and it cost 1 and a quarter mark, the second is from 1923 and it is for 1 and a half MILLION Mark. I mentioned in my autobiography, LEAVING SOUTH CAROLINA, a former boss whose father left Germany with a fortune ($250,000 dollars worth over $18 million in today’s money) and by the time the ship arrived in the USA it was only worth $2,500.
          It will not likely get that bad her but 275% inflation will be bad enough.

    • David

      If a gov prints money to buy its own debt to keep rates low so people will invest to “create jobs” so some president will get re-elected – not only is it not sustainable, it ain’t right. So your true buyers of your country’s debt bail leaving your currency worthless.

    • DaveH

      Peter,
      The dollar is declining because the Federal Reserve is creating excess money. The more money that is created, the lesser the value of the existing money. Who suffers the most when excess money is created? The answer is those who have the most cash-denominated savings. The Federal Reserve is basically stealing from the savers when they create excess dollars.
      I suppose the Federal Reserve could buy all the US debt, thus putting said amount of dollars in the former creditors’ or Government’s hands (called monetizing the debt), and then forgive the debt. But would they? I doubt it. If they did that, then that newly created money would add to the money supply and eventually more money chasing our produced goods and services would decrease the value of the dollar and increase prices of goods and services dramatically.
      Bankruptcy is a legal action taken to allow the affected company and its creditors the opportunity to work things out in a court action when the company can no longer meet its debt obligations.
      If our country defaulted on its debt, it would result in lenders being very unlikely to lend to us for the foreseeable future. It would not result in the end of our economy. Here, in fact, Jeffrey Rogers Hummel argues that it could be a good thing:
      http://hnn.us/blogs/entries/53544.html

    • kkflash

      It is precisely because they can print dollars at will that we have a declining dollar. More dollars chasing the same amount of goods equals lower-valued dollars.

  • http://com i41

    David, when some slub starts whining like a regressive depressive b–ch, about some ones spelling. They are just getting stumped to refute facts.Destroy and end all the fed agencies. Canada flight controllers are all privatized and get honors for proformance, end all the worthless agencies, ED, ENergy, AGRICULTURE, EPA, and on down the line. The samings so these lazy beltway smucks need to work in the real world. Peter did you ever take government and civics in high school. Money is printed and nothing is being produced, just like all numskull dems don’t understand either. The airy fairy dollar from beltway idoits.

    • David

      I agree 41 but how do we do that? Have another round of Tea Party backed folks elected? There is a real struggle going on right now especially in the repub party.

      • Richard Pawley

        Sadly, not all Republicans are believers in the Constitution or that “that government which governs best is that government which governs least”. The President likes to look to Abraham Lincoln but Lincoln said “You cannot escape the responsibility of tomorrow by evading it today.” The President is creating his own legacy and he will discover that his policies of spend till you drop will have done more damage to the country and than any foreign invader (by the time he goes home to Chicago). However, without Congress willing to pass all his trillions he could not do it, so I hold Congress more liable.
        Presidents come and go, are loved and hated, but Congress is always there and the senate and the house control the budget. Will it hurt to stop the squandering of all we can borrow and print? Of course, but the devaluation of the dollar to where it is worth only a quarter will hurt even more, especially those on fixed incomes and the elderly, and if Congress doesn’t get it’s house in order (mainly the senate) that is what is coming. Knowing human nature I suggest that all prepare for it. The rich have bought gold the rest of us can buy all the things we need in life because they are going to cost a whole lot more in the near future (except houses).

        • David

          True but meanwhile we let EPA crush industry and the high paying blue and white collar jobs with them. If he can’t get it done through the front door; then use the back door. Either way we lose.

  • American Taxpayer

    http://www.youtube.com/watch?v=ko-qFqmKsYQ
    Please watch this BHO investigation.
    Thank you.

  • http://com i41

    Since all of these jackwagon agencies are worthless and impede businesses and private businesses, catch the elected idoits on the vacations when home and horse wipe them on their voting and approving this massive worthless spending, as well as kick some friends rears to get involved and attending and calling or emailing. I prefer going face to face with the elected clowns and if only a representive of their offices show, hammer them and their worse chicken crap boss. Also all other elected officals have phone numbers and email to make contact, even the purple lipped muslim marxist moron in the WH. When the answers you get are pure b–l s==t, call them out on the facts and make them answer in simple yes or no answers. No filabustering. You will be surprised most people need some one to start the ball rolling and lead by example not bs. If someone whines you aren’t showing deference to the office, simple answer is, honor needs to earned and not given to liars and crooks. Since most of these beltway idoits listen to lobbyists,just ask who in the hell put them in office? Usually I ask why Congress, the marxist/communist socialistjug eared one and their federal leeches not taking wage reductions and less benefits, like everyone else is on the free trips back home with an open ended credit card I pay the tab one? For the wages and bennies these pukes ge, serious cuts on them need to be made and they work for us, not thee other way around.

    • David

      I will be there in a few weeks for the third time to meet face to face with them. Wish us luck-we’re going to need it!

  • DaveH
    • Vigilant

      Good article, Dave.

      It doesn’t mention that GE’s success is largely due to the cushy relationship with Obama that Immelt enjoys, nor the zero taxes paid.

      GE Capital lobbied for special treatment and was able to push out a major lending competitor as well.

      • Vigilant

        Another bit of news you can guarantee won’t be covered by the MSM is the Wall Street Journal article at http://www.moneynews.com/StreetTalk/WSJUStoSellGMStakeat11BillionLoss/2011/04/21/id/393608?s=al&promo_code=C200-1

        Eric Bischoff, Jovi Anus, jopa and other communists who hailed the success of Obama in “saving” GM will not be happy (or go into a state of denial) to learn that the USG is selling off the last of its share in GM at an $11 billion LOSS to the taxpayers.

        GM is still a loser. Since unions are now the major shareholder, I don’t give it much of a chance of succeeding. Ask me if I care.

        • DaveH

          That’s the only reason I could think of for the Government to get out of GM early. They must have seen the handwriting on the wall.

  • FreedomFighter

    End the Fed.

    Laus Deo
    Semper Fi

    • DaveH

      I second that motion.

  • mrbill

    I am afraid we are in for some turbulent times. I thought I had done everythin right by paying my house, car, etc. before I retired. It looks like what littler money I have will be worthless sooner than later. I cannot imagine how anyone on a fixed income is going to fare when the excrement hits the ventilating device if they still owe money.

    • Richard Pawley

      This is why many are stockpiling and learning how to use non-perishable food that has a life expectancy of ten to thirty years. So many are doing this that there is a shortage of some things. Get out of debt, take a part-time job, spend wisely, buy those things you will need next year or the year after that. Shop sales, learn about food storage and water storage. There is time enough to prepare but not time enough to waste. Coffee in vacuum packed cans, spaghetti in airtight containers, sugar, homemade jam, all will last a decade in a cool dry place (I know this from experience). I used a jar of spaghetti sauce – a glass jar – last month that expired in 2004. It had no meat or cheese in it and was fine. Never buy tomatos in cans as they can leech out a chemical from the micro-thin liner that is in the cans to prevent rust and it can cause pancreatic cancer. Most of all pray for guidance and direction. God is always there and there is nothing you can do to make Him love you more than He already does. Many are non-believers so they miss so much.

  • Carlucci
  • WayneT

    I see where gasoline is now over $5.00 per/gallon in some parts of the country. I guess we are now beginning to feel the effects of the Obama failed policies. Fire this idiot in 2012 if we want to continue having a country.

    • Thamera

      As if $3.00 and $4.00 per gallon of gas isn’t high enough already! I just read a hilarious article from The New Yorker published in Sept. 2010 how Obama saved us, didn’t you know! Ahhahahahahhahahahahahhahahahahahaha

      • Thamera

        btw Wayne T…I agree with you!

      • Bert Cundle

        O’Bomba… Is looking into ho He can Sue, The Oil Companies For Price Violations! He makes Billions… while our Gas price may drop $.50 / Gal.

  • Dan az

    A little of subject but still relating to we are all screwed.
    http://www.humanevents.com/article.php?id=41425

    • Al Sieber

      Dan, you’re right, but we’re more then screwed, it starts with a “F”.

    • DaveH

      There are measures they could take to cure our economy, but they won’t because that would mean diminishing their power and perks. They would sooner fiddle while America burns.

  • Bert Cundle

    Gross Domestic Product (GDP) Definition
    Gross Domestic Product (GDP) – Definition of Gross Domestic Product (GDP) on Investopedia – The monetary value of all the finished goods and services produced within …
    http://www.investopedia.com/terms/g/gdp.asp – Cached
    How can (G.D.P.) Be about the same as our National debt?
    Talk about inside burglery… So that is the Democracy,we are pushing down the throats of other countries?

  • Richard

    I extremely enjoy how you turn a “factual” study into a “biased” study in your mind. Funny how you always link to and talk about theories and refute real facts.

    Diluted: DaveH

    • JC

      You haven’t presented any real facts Richard. Just your left wing / statist / anti-American point of view…which you can keep by the way.

  • http://www.facebook.com/ Christy

    Brilliance for free; your parents must be a sweetheart and a crtfeiied genius.

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