As I have mentioned many times, this year’s cast of Republican candidates is one of the strongest in recent years. Over the course of the long debate season, each candidate has been shown to have both strengths and weaknesses.
Here is a question from October’s Republican debate, held in Michigan, where the next primary will be held tomorrow.
Bartiromo: The economy is America’s greatest strength. In a recent poll by the Wall Street Journal and NBC News, two-thirds of the American people said that we are either in a recession or headed toward one. Do you agree with that? And as president, what will you do to ensure economic vibrancy in this country?
That was the first question and was directed to Fred Thompson. Here is his answer.
Thompson: I think there is no reason to believe that we’re headed for a recession. We’re enjoying 22 quarters of successive economic growth that started in 2001, and then further in 2003 with the tax cuts that we put in place. We’re enjoying low inflation. We’re enjoying low unemployment. The stock market seems to be doing pretty well. I see no reason to believe we’re headed for — (pause) — for economic downturn.
As far as the economic prosperity of the future is concerned, I think it’s a different story. I think if you look at the short term, it’s rosy. I think if you look at a 10-year projection, it’s rosy.
Interesting. Three months later, we are greeted with these headlines.
- Odds Are Growing for Economic Recession
- Talk of emergency rate cut hits dollar
- U.S. recession worries hit crude prices
- Citigroup’s Layoffs Could Reach 24,000 This Year
- Mayors face test of spreading foreclosures
Throughout the debate season, a couple of candidates have consistently said that the economy isn’t rosy. And been mocked for it.
Ron Paul: Yes. I think this is not a consequence of free markets. What’s happening is there’s transfer of wealth from the poor and the middle class to the wealthy. This comes about because of the monetary system that we have. When you inflate a currency or destroy a currency, the middle class gets wiped out, so the people who get to use the money first, which is created by the Federal Reserve System, benefit, so the money gravitates to the banks and to Wall Street. See, that’s why you have more billionaires than ever before.
Today this country is in the middle of a recession for a lot of people. Michigan knows about it. Poor people know about it. The middle class knows about it. Wall Street doesn’t know about it. Washington, D.C., doesn’t know about it. But it’s because of the monetary system and the excessive spending. As long as we live beyond our means, we are destined to live beneath our means. And we have lived beyond our means because we are financing a foreign policy that is so extravagant and beyond what we can control, as well as the spending here at home, and we’re depending on the creation of money out of thin air, which is nothing more than debasement of the currency.
It’s counterfeit. And it is a natural, predictable consequence that you’re going to have people benefit from it and other people suffer.
So if you want to help the economy, you have to study monetary theory and figure out why it is that we’re suffering. And everybody doesn’t suffer equally, or this wouldn’t be so bad. It’s always the poor people, those on retired incomes, that suffer the most. But the politicians and those who get to use the money first, like the military industrial complex, they make a lot of money, and they benefit from it.
Like I’ve said many times, the debates were very informative. You should click the link above and see what the other candidates said about the economy. Enlightening.
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45 Responses to “Fred Thompson: Short Term Economic Outlook Is ‘Rosy’”Search
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The countries overall economy going strong. Individual areas (Cities, States) might be experiencing some downturns, but those are ONLY due to their OWN ineptitude by the choices they have made (not to mention the taxes).
One of the reasons most “polls” show that the economy is “bad” or “heading down hill” is just want you quoted: the Main Stream Media is “reporting” its that way, and most people don’t have time to go find out for themselves, so they “believe” what they hear on the news sound bites.
The reason Michigan is in such dire straights is specifically BECAUSE of what their state government has done with taxing, and the unions all but destroying the auto-industry with all their excessive “demands”, not to mention the gubment “regulating” what they can actually produce vs. what the public really wants.
I look out the window here on just one side of the building and I can count 13 large building construction crane (those ones for the 20+ story buildings), and that’s just ONE direction from here. I pass 7 LARGE office buildings and condo’s going up on my drive home. I can count at least 5 HUGE pastures that are now being converted to housing and businesses just from my house in Katy to my step-daughters school.
As bad as the banks were in the sub-prime houseing mess (actually it’s only about 6% of homeowner, not the 50+% the news would have you believe), they don’t finance huge projects like that without a VERY, VERY good chance they are going to get their money back.
The economy is going GREAT! And it’s the American Economy, not the American “Government” economy.
I agree with Dave. Look at Michigan……. they have been taxed into the poor house. Look at California. Arnold ran as a conservative and has taxed them almost to a recession.
Look very careful at the promised being made in Michigan. That’s auto country. If your candidate is a global warming addict, the manufactures of autos are going to be punitively hurt. It’s not wise. If the candidate is promising Michigan, government can fix their problems.. It can’t.
my fingers don’t do what my mind says…. promises*
If the overall economy is going strong, why is Bernanke worried?
Reread it. It’s what I said in my last paragraph. He’s looking at the American “Government” Economy, which is what? WAY over spent!!
Of course it’s not going well. But of course how do the Politicians what to fix it? Spend less? Oh H3LL no! But what happens in they raise taxes. Just look at Michigan for the results of that road. So of course the economy is bad…it won’t “support” all the tax raises they “want” to do.
Sorry….this is a REALLY bad pet peeve of mine. An no….RP isn’t the answer either.
Bernanke’s worried cause the policies that he espoused of cheap credit have discredited him
We are in a recession only if you acept we are in a recession
Citi Bans layoffs are like fords - not anything to do as much with the economy as with competative forces, market forces and the natural evolution of idiots
BL - I was just coming back to say the same thing.
Any company he lists as “reasons” or “example” of why we might be in a recession are totally mis-characterized. If a company is doing bad or laying of, it’s because of decisions THAT company made, not anything else. (Sure, some might be because of changes in laws/policies of the government, but see the next paragraph for that too)
The market place changes all the time. If a company can’t change with it, they will eventually go out of business. But that in NO way means the entire economy is “bad”.
Have you ever seen an economist who wasn’t worried?
As I wrote here, Michigan’s troubles are caused by Jennifer Granholm’s taxaholic ways.
I also agree with Dave that the perspective people have is caused mostly by the Agenda Media.
I’m guessing that you guys think Bloomberg is also an arm of the liberal MSM?
http://www.bloomberg.com/apps/news?pid=20601109&sid=a1r8gcqTEmD4&refer=home
I think things are worrisome for banks and lenders who practiced unethical business practices. I think our debt is a problem. I do think all this can be corrected without us seeing a depression or recession.
A lot of banks are going to take write downs during this credit crunch as a matter of strategy. American Express is doing it even though the anount of charge offs seem pretty steady. It’s becoming more apparent that when Bush pushed the limitations to Chapter 7 bankruptcies it had a unforseen negative consequence. It loosened credit dramatically and allowed for unqualified loans well before the law took effect. It didn’t change a borrowers ability to pay, only the consequences of not being able to pay by making it harder to file Chapter 7. Funny thing… no one has really mentioned the changes in bankruptcy law as a possible preemptive cause.
During a recession and a perceived recession, a lot of companies will work the books to show losses, layoff employees, and report lower earnings expectations to justify a drop in stock price. This is a natural thing that keeps the officers and management of a company in their jobs since they have an excuse for poor performance.
Look for a lot of executives exercising their stock options and selling off large blocks before the recession hits. They’ll buy back when the stock goes up again. Volatility is the object of the stock game in a hedge fund market environment.
The upcoming recession has a lot of artificial components to it for political and financial manipulation.
But…but, BarryM,
davewolfgang, BL and gmg425 say there is no recession and there will not be one. It’s the MSM!
Meanwhile, the WSJ economics blog has this today:
http://blogs.wsj.com/economics/2008/01/14/mortgage-originations-to-drop-in-2008/?mod=economy_real_time_blogs
On a slight tangent, but isn’t it a little disconcerting how “the economy” - particularly the DJIA, which the MSM uses as a convenient yardstick - is at the mercy of rumor, perception and rumor of perception?
The market can rise or fall on consumer confidence (regardless of whether it has any basis), weather reports (whether they are accurate or not), the latest tirade from the Iranian Despot, and whether Bernanke had his martini shaken or stirred at the last cocktail party.
Those are in addition to actual economic results, interpreted to satisfy multiple agendas.
And let’s not forget futures, futures, futures. . .
Some days I wonder what it would be like without a NYSE. How would Katy Couric know to tell us if we should be happy or sad?
Good question, Rick. I think it probably would come down to what davewolfgang did above: If Katie looked out her window and saw what he sees, the economy would be good.
If she looked out another window, she might see the subdivision across the street. Planned for 159 homes, streets built, utilities ran, etc, 7 homes have been built, 2 are occupied, no current construction and the sales trailer is now unoccupied with a number to call if you are interested. And this is repeated twice on the drive home.
Just depends, I guess.
Well, BigJolly, there really doesn’t need to be a recession because of the economy, there needs to be one for the upcoming election. The banks want a long term bailout. A lot of big Wall Street players want some volatility to short stocks and play some options. Some big company CEO’s want some cover for poor performance. The MSM wants some fear and pain in peoples pocketbooks so as to blame Republicans in order to get demoncrats elected.
That’s how it works. The most worrysome thing is the value of the dollar and inflation. Basically, the middle class is getting screwed as usual. There are more forms of taxation than just overt government taxes. Printing money and inflation does the job too. My wallet is lighter these days.
Don’t you just wonder?
I’m not an economist, I’m probably not too smart either, BUT! our country is broke, a lot of the people are broke, many are up to their noses in debt, it also looks to me that inflation is way up, even though they say it is not, gold is around $900.00, why are interest rates going down? They are pushing the rates down to keep the economy from failing. If you ask me, they are throwing good money after bad. Our house of cards is very shaky.
BigJolly,
Don’t worry too much, once Fox News and Rush Limbaugh start talking about the bad economy, these people will buy into it. Until then, they will probably find it too comfortable to leave Fred Thompson’s Dreamland.
I gave those examples of the visible ways on WHY the economy is not “going bad” or “as bad” as they want you to believe.
One of my old bosses companies wires new offices all around the country, and he’s so busy he’s having to turn down work. And it’s not just his business either. Companies don’t do the things they are doing unless business is good. And yes, they WILL use some Enron Accounting to make it either “look bad” or “look good” when they need it too. It’s the internals of what a company does that gives me a good idea what the economy is doing and what most businesses see as the trend in the future. You don’t move into a brand new larger office, or expand to another floor of a building, if you are “expecting” a bad economy. You don’t hire more employee’s to fill out that expansion because money is going to be tight in the future.
A bad day, or even a bad week from the market avg.(Dow, NYSE, etc.) doesn’t mean a dang thing for the economy. A company (or 10 or 20 companies) laying off x number of people doesn’t mean a thing for the overall economy, just for THAT business.
As Barry said, the MSM wants the “impression” that the economy is bad, so they can blame the republicans and get their boys the dimwits back in. And you want the “proof” of that. Do a search of the “bad economy” stories from when the Republicans had both houses AND the White House, vs. the days and weeks after the Dims won the House and Senate back. Have you also noticed how all of the “reasons” for the “bad economy” are from Prez Bush…and don’t mentions the Congress at all. Spin, spin, spin!
So, just to be clear, you guys agree with Fred that the short term and relatively short term outlooks on the economy are rosy and that nothing needs to be done by the Fed to intercede. Correct?
BigJolly…. are you pushing Ron Paul now (dare I dream????)?
You are correct, of course, that the economy is in recession and has been in recession since Q3. With the reclassification of Fed documents that took place soon after Bernanke took over the reigns at the Fed, it is more difficult for a layman to determine statistically whether we are in fact in a recession or not. After the various restatements of Q3 data, it became apparent that the private sector economy contracted in Q3 for the first time in over 5 years. Q4 was officially recessive without the restatements and revisions, which will certainly be downward revisions. The outlook is anything but rosy.
Whatever you want to say about Ron Paul, his prognostications on the economic front have been prescient. He was telling us that 10%+ inflation (monetary inflation - which is different than the official price inflation) was a fact long before government statistics began to show that relative prices are in fact increasing.
The government statistics of ‘core’ inflation are basically useless because they allow the Fed to arbtrarily substitute one similar commodity for another in determining what constitutes the index, and they don’t include the supply of the money commodity as a part of the calculation. That would be like letting me decide how many inches equals a foot each month and arbitrarily change the objective length of a foot in an exercise where I am compensated by the foot!
Ron Paul has been warning for nearly 10 years that the Fed’s policy of inflating was leading to malinvestment, and has specifically cited the housing bubble going back as far as 1998.
Ron Paul is not my saviour, but he is my candidate. He happens to be the only candidate who possesses at least a cursory understanding of economics, and is in fact quite respected among many mainline economists in spite of the different philosophical orientation that he represents.
Most economists, at least those serving the Federal Government, are Keynesians, meaning they support the monetary policies promulgated by John Maynard Keynes. Keynes advocated state intervention into the economy to attempt to limit the boom/bust/recession/depression phenomenon. Keynesian theory is opposed by the Austrian School economists, of which Paul is an advocate.
The Austrian School view advocates restraining the government from intervening in economic matters and eschews the concept of central planning. Began as the intellectual progeny of Ludwig Von Mises, the Austrian position notes (properly) that central planning can never allocate resources more efficiently than free markets, and as such is the decided enemy of consumers. It teaches that government attempts to control the economy and avoid the boom/bust business cycle (an Austrian concept that has gained wide approval) exacerbates the cycle and actually intensifies the horrors it seeks to limit.
Alright…. that’s too much for one post. I cede the floor, after thanking Big Jolly for the Ron-Paul-friendly post.
No, mty, I can’t do that, he has too much of that other stuff holding him down.
But, IMO, he has been the loudest and most consistent voice on the economy throughout the debates. And, I happen to agree with him that we need emergency measures - cut spending and taxes, not have the Fed pour more money into the economy so that we can go further into debt.
#4 BJ
Why is Bernanke worried ? Because he is the Chairman of the Fed and he should be worried. He should be worried when things are good about the unseen dangers that lurk around the corner. He should be worried when things are bad about how to resolve the mess. If he stops worrying, then I am very concerned.
#21 BJ
“we need emergency measures”
What the heck is that and just how do you propose to implement them ?
Isn’t it amazing that all this talk and RP supports come back to what I said in my VERY first post.
The American Economy is good.
Why does everyone keep bringing up the American “Government” economy. (And yes, that is what most of you ARE talking about)
The government can only do ONE thing to the economy - Get in the way of it.
We need to immediately cut the cap gains tax and perhaps marginal rates again. That can happen relatively quickly. Oh, and make the ‘01 and ‘03 cuts permanent.
Spending is much harder because so much of it is in entitlements and the politicians will have to compromise somewhere. So I don’t have a quick answer there. Wish I did.
I’d like to say end all subsidies immediately, but that won’t happen. Rolling back the prescription drug program isn’t going to happen either. Like I said, cutting spending is much harder. Perhaps an across the board 1-2% actual decrease. Or as Eric suggested the other day, capping the budget at a hard $3 trillion. Ain’t gonna be easy but I don’t think the tax cuts by themselves will pull us completely out.
Do you?
Big Jolly….
If we could get some other candidate to take a responsible position in relation to spending and on the subject of civil liberties, I might be willing to overlook Paul.
I just can’t bring myself to vote for someone who doesn’t thing our country has a fiscal crisis (China and Arab States bailing out our banking system, for cripes sake) but does think we have too many civil liberties. If I had an alternative, I would consider it. I don’t, so I’m out working my precint for Dr. Paul.
I do appreciate your thoughts on this. At least you’re paying attention enough to see the disease (economic problems), even if we don’t see eye-to-eye on what the prescription is.
Dang, finally get an interesting conversation going and I have to leave for a meeting.
Corporate rates also - cut or eliminate completely. Have to put more real money in to the economy, not just credit via lower borrowing costs. That will just deflate the value and the circle starts again.
While I like a lot of Ron Paul’s positions, I think he is a nutjob. Every time I hear him I consider him to be out of touch with reality. He simply does not understand history, human nature, and the nature of politics.
He’s not competent to be POTUS. The libertarian constitutionalist folks need to find a candidate that can articulate their views without sounding like a conspiracy nut.
Right now, I believe the economy is mixed but the US is in a position to export lots of goods and services because of the low value of the dollar. Unfortunately China is manipulating its currency to match ours… but that’s another discussion.
BarryM,
Point well taken. My exports have grown from about 15% of gross to almost 30% of gross in the last 18 months. And the total gross is about 7% higher.
But I’m not in homebuilding or heavy manufacturing. Those guys are taking a beating.
Also, the lower value of the dollar is why we are getting a lot of foriegn investment in our country. Everthing is discounted. Even if the banks and companies don’t make money right away the dollar will eventually rise as borrowing slows down. They will make a killing in the medium term.
BJ, why are you listening to the left wing rags on how the economy is going?
How’s your life in general? Are you making more money than a few years ago? Is your business doing better?
For me, I’m making more money than a few years ago.. My wife’s business is doing fantastic.. The only thing that can really cause bumps is the govmint taking MORE of my money.. then my personal economy will be doing terrible..
I don’t listen to WSJ blogs, or any left leaning “news” sources.. If something is going bad for someone else, well.. they need to work harder.
Your links are above from:
AP
UK
FT
PMS-NBC
REUTERS
Seriously.. which one of these are not left wing rags?
The reality of economics is that every single sector cannot be strong at the same time. That only happens in one place in the universe (which will remain unnamed).
The economy is strong. Once we get thru the housing/credit crisis we’ll be back on a roll. And rest assured we will get thru it.
(by the way, I predicted the credit crisis over 2 years ago, right here :))
Zippy, back for just a bit.
Pray tell, please, I beg you, give me the “real” sources of “unbiased” news! Okay?
#33 BJ
LST.
Not all banks were affected, most were not, just those who gave credit and went after the subprime mortgage market
Trying to make a Reagan Recession out of a group of idiots who lent 200,000 to people who work at Walmart is NOT a recession despite how hard Huckabee and his Alcolytes try
Headshaker #32
What about the trillions in derivative that are based on the mortgage-backed CDO’s - but with leverage as high as 200-1, and financed by the biggest names in commercial and financial banking? What about the fact that most of these big banks are so deep in this paper themselves - on top of the loans to others who used the money to buy this junk - that they are functionally insolvent across the board. They’re begging from sovereign funds and various Asian central banks just to stay liquid enough to operate. The Fed just ignores reserve requirements because there is no other choice. The only way out of the mess is to sit on the ball and pray that the most probable scenarios don’t play out.
The deflationary spiral that could be set in motion by a full credit collapse is just hinted at in the housing market implosion. It’s not just subprime - the entire inventory of paper that allows further financing of mortgages can’t be moved. If there Fed hadn’t agreed to buy some of the junk, there would be no market for even AAA bonds backed by mortgages – and that means no new money to keep the ‘virtuous’ circle going. If the Fed doesn’t keep up the current course of lower and lower interest rates, then there will be no loan markets of any consequence for any sector serving the American markets. Bonds backed by commercial real estate are following residential real estate into the abyss. And the derivatives with them as the underlying asset are just as levered up as their residential peers.
Universalizing a personal experience to make broad inferences about the national economy isn’t a valid approach to gauging national economic health. We’ve got serious problems in America on the economic front. In addition to the spending and currency problems, the credit crisis that is not over and will prove to be a grave contagion, we’ve got to deal with a political class that sees the treasury not as a sacred trust to be dealt with as fiduciaries, but instead as an endless supply of wealth from which they can play at utopian social schemes. If I were handling money appropriated from people without their will out in plain sight, I’d surely have a very reverential and solemn attitude about how I spent it. I wouldn’t want to rub the thievery in their collective faces, for fear they might get a little pissed. These clowns love to spend the loot (our money, dammit), and spend billions more every year than what we have and finance it. They don’t understand the implications or they don’t care, and they certainly don’t even feign sheepish about spending the ill-gotten gains.
Thus my position voting for Paul - He may not be able to stop the problems imminently ahead. But he does understand the basic nature of the problem, and realizes that there is one.
#36 mty
Don’t you think if it was really that bad the “big money” and “smart money” would be panicking?
Why aren’t they? I’ll tell you: because the “big money” and the “smart money” control everything. They aren’t going to let the world come crashing to a halt.
It’s just the way it is, and Ron Paul isn’t ever going to change it.
Two major things making the economy look bad are oil and food; Bernanke can do nothing about either.
The smart money are the ones who facilitated the specific problems that have lead to this crisis. If the debt obligations had to be marked to their market value, every single major commercial and investment banker has massively negative book values. In layman terms, the smart money is in the tall grass, and is in no position to do a thing to extricate themselves from the predicament. That is what this is about – the utter collapse of the American smart money and the end of the American dominated global financial architecture. The smart money now are the Asian and Middle Eastern nations that are only knee deep in the manure. They are buying our assets for a relative song.
The only possible scenario to avoid armageddon is to NOT panic. Right this moment, the credit markets are seized up. Nothing is moving in the open markets - zip, zilch, nada. For it to move, there would have to be a wholesale repricing of assets. That would also entail marking the assets on the books of every major financial institution - not just banks, but insurance companies, manufacturers, pension funds, etc - to the market price, making many of them bankrupt in a flash.
The waiting game is ongoing. The hope is that the Fed can come up with some way to orchestrate a slower unwinding than a panicked selloff. They inject liquidity by buying the underlying junk - at least a small market for the crap - to avoid any bank falling into absolute default and being unable to service continuing operation obligations. They have employed foreign sources of capital who are willing to go along with the plan for selfish reasons. First, a sizable of their own wealth is in dollar-denominated assets, and they don’t wish to see that wealth go *poof*. Second, they stand to have a very handsome payoff if the waiting game ends favorably. Third, the US economy collapsing wouldn’t spare the rest of the world. Though we would bear the worst of it, it would cause a deflationary cycle in all global markets.
The current strategy is to convince the markets that they intend to continue to have a very loose financial policy as it relates to the currency issue; not only have they slashed rates precipitously, they are clearly signaling that there will not be a change of sentiment in the near future.
Which brings us to the dollar’s precipitous decline that is threatening to become full out collapse. The exact policies that can combat the credit crunch (lowered interest rates and the inherent creation of more digital dollars to meet the increased demand as the cost rises) are the cause of the dollars cratering of late. This is the cause of the increases in the price of gold, and contrary to what you hear in the short bus media, the price of oil. Almost all commodities are being affected, and the result is that prices across the board are rising and will continue to rise.
We ‘win’ if they can convince the markets that they intend to inject enough liquidity to keep the system solvent until the problems can be worked through, but not so loose that they will abandon protecting the dollar. It’s a ridiculously precipitous task, and Bernanke isn’t responsible for the problems himself – he inherited the bubbles. He actually began the process of trying to take a little air out in an orderly fashion as soon as he became Fed chairman, but had to reverse course when the credit crisis surfaced violently this summer.
In a nutshell, you’ve got both inflationary and deflationary barbarians at the gate. To turn to fight one is to leave your flank exposed to the other. And lest some bright respondent retort that they will cancel one another out - think again. We are facing a fiscal crisis unparalleled in our history, with the possible exception (and I mean only possibly) of the great depression. They went the deflationary route….. Fortunately (yikes!), the rest of the world decided to go about the business of destroying themselves in the late 30’s, and we were able to climb to the top of the international financial heap. We instituted our own financial system on the world (Bretton Woods), and it survived many a crisis. It finally completely collapsed in the early 70’s when Nixon took us off the last vestiges of an objective value peg for the dollar.
A person who’d been listening to the predictions and principles of Austrian economics might have made a mint by making levered bets against the dollar. If I’m right and the Fed continues down the road it is on, there are still fortunes to be made. I’ve done absolutely GREAT on the short side of the dollar trade, but that doesn’t mean a thing in relation to my neighbors. Actually, it does. My windfall represents the actual wealth losses of 200 of my fellow citizens (relative to the amount of my portfolio) who denominate their wealth and get their paychecks in dollars (I trade dollars at 200-1 leverage). If you’d listening to Austrian economists, you’d have been buying gold the last 3-4 years too (as a very conservative, wealth preservation strategy). I’ve been buying it on high leverage for about 12 months, and again, am doing great.
But enough of my personal ruminations. The writing is on the wall. We are facing a very tough patch ahead. Whether we skirt the absolute worst possible scenarios is anyone’s guess. I am certain that we will not come out the other side as relatively wealthy as we entered it. If we do come through relatively intact, there will have been an incredible transfer of wealth from the United States to our creditor nations – that is water under the bridge. The question is whether we wait for it to play out before we start to plan for picking up the pieces.
mty - advice? I am holding USD while living in NZ. At current exchange rate will lose greatly as NZD is at all time high. My mortgage rate is 8% and could pay it off if we exchange but looking to hold for now although this may be a mistake. What to do?
nz-texas
Where have you been, bubba ? Nice to see you back.
NZ-texas,
If it were me, I’d be out of dollars for a long-term position. There have been and will be corrective bounces, but the prevailing trendline is decidedly downward. Given that we are in uncharted territory (the dollar has never been lower), there is no real technical support levels that have to be respected.
The slide probably will gain steam, as some very intelligent currency specialists are predicting (actually, some are suggesting it to help us out of the credit mess)the dollar index to settle in around 40. 80 had been critical support that was last tested in the late 70’s (the malaise days). We’re currently a little over 75 on the index, meaning we’re down close to 10% just since July.
See the link for the last 2.5 years here http://quotes.ino.com/chart/?s=NYBOT_DX&v=dmax .
This is what Dr. Paul is talking about when he talks about the destruction of our currency. Throughout all of history, it has been the most sure way to destroy the middle and lower classes of society, and ultimately bringing about the collapse of many a great empire.
The other thought is that you can put a hedge on that protects the relative value of your wealth. If you’re dollar holdings are at 100,000 USD, you can run a 50-1 levered position short the USD versus the NZD that completely makes you immune to the USD degradation for just $2000. You are completely hedged unless the dollar corrects at such a rate to eat up your levered position before further loses occurred (very VERY unlikely, in my estimate).
Oops…. I meant to close with…. if it were me, I’d pay off the mortgage and start saving your wealth in vehicles designed to maintain value in something other than fiat currencies that are relatively impervious to a deflationary asset event. If you have sufficient starting capital, I suggest looking into http://www.europac.net/ . Schiff has a great track record for being ahead of the curve and specializes in commodities and global markets.
Here’s a good article from Schiff regarding the inflation vs. deflation scenarios…..
http://www.europac.net/externalframeset.asp?from=home&id=11164
Not a fun subject. For the record, Schiff is a Paul-backer, and openly encouraged all of the folks he made millionaires many times over to send the maximum to Dr. Paul. Many did, and then we had 25+ million…..
mty- thank you very much. Will talk to the boss (aka wife) and appreciate your time and effort.
Thanks Texpat - work has been busy and have been on vacation. Actually, came to Houston for 3 weeks but nothing but seeing family. Happy New Year to all