28 November, 2004

Crisis towers over the dollar

Mr. Sharkey sent the following in:
Global Economy

Crisis towers over the dollar
By W Joseph Stroupe

"When analyzing such matters as the vulnerability of the US economy and the chances of its collapse, it is vital to avoid the two extremes of "calamity howling" on one hand and investing blind faith in the status quo on the other. Unforeseen and unexpected attack-induced collapses of grand proportions can and do occur. The sudden collapse of both towers of New York's World Trade Center, for example, took everyone by surprise - who could have foreseen that the two towers, which survived the massive lateral impact of two huge planes, would, only minutes later, collapse vertically upon themselves, their own massive weight ensuring their demise?"
An alarming, but interesting introduction and Mr. Stroupe further goes on to point out:
"Now that fire is raging, and ferociously eating into the girders. Controversial and ill-advised unilateral US economic and foreign policies since September 11 are only fueling that fire. In the immediate aftermath of the re-election of President George W Bush, international support for the dollar and for related US economic and foreign policies is noticeably weakening, at a time when it is most needed to support an unprecedented and mushrooming mountain load of debt. Recently, voices from within the government of Norway have called for a switch from the dollar toward the euro for international petro-transactions. The governor of the Bank of Japan has recently stated that having the dollar as the sole global currency is a marked disadvantage and danger, and recommended moving toward adopting the euro as a global currency alongside the dollar. The appetite of the big Asian economies to continue buying dollar assets is waning - last month the US barely achieved the $60 billion of foreign cash inflow required each month to keep it afloat. Hence the possibility of a Twin Towers-like vertical collapse of the US economy is becoming greater, not lesser.

The following highlight the extent of the mounting debt and the risk involved:
  • The total US public national debt now exceeds $7 trillion.
  • When Social Security, Medicare, Medicaid, military and government pensions are added in, the total national debt exceeds $51 trillion, according to Fortune magazine - that's nearly five times the gross domestic product (GDP) .
  • The current year's deficit alone approaches $1 trillion when you add the off-budget items.
  • Derivatives (highly leveraged and enormously risky instruments such as interest-rate futures, options and swaps) now total $180 trillion, 17 times the GDP. Warren Buffet calls derivatives "instruments of mass destruction". Many financial institutions have become highly invested in derivatives. Government-sponsored enterprises such as Fannie Mae (the Federal National Mortgage Association) and Freddie Mac (the Federal Home Loan Mortgage Corp) use derivatives heavily. Because of the inherent nature of derivatives, these instruments and those using them are extremely sensitive even to small and moderate interest-rate increases.
  • The total US consumer debt is more than $8 trillion."
Another link in Mr. Sharkey's E-mail is here:
The Next Four Years - borrowed time
Listen to this commentary
(This requires Real Player or an Alternative)

"Today, our special series of commentaries from different political perspectives continues with commentator and economist Paul Krugman. He says for the next four years, we'll be living on borrowed time. And he thinks we might end up singing for our supper."
This is interesting, in so far as that NPR actually has an honest, though short, commentary upon the economy. Of course, I am sure that it has nothing to do with the fact that the Repuglicrats are in solid control, and that their beloved Socialist-Rat Bastards, the Democraps, are not, but of course this is pure speculation upon my part. It has nothing to do with the years of listening to the cheese and wine loving whiners and social engineers that are the normal fare from National Propaganda Radio.

Then again, you should take all of this with a grain of salt, and forget that Gold is now up 71% since August of 1995...


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