United States Heading towards a Depression?

The dollar is in bad shape and further Fed rate cuts risk a collapse

The dollar traded at $1.5095 per euro at 11:13 a.m. in Tokyo, after touching $1.5144 in New York, the weakest since the euro's debut in 1999. The dollar declined to 106.35 yen from 106.49 yen yesterday

The Australian dollar touched 94.57 U.S. cents, the most since March 1984, before trading at 94.27 cents. Australia's benchmark interest rate is 4 percentage points above the Fed's target.

The dollar weakened past $1.51 per euro yesterday after Bernanke said the Fed ``will act in a timely manner'' to insure against ``downside risks'' to the economy.

Futures on the Chicago Board of Trade show traders expect the Fed to cut rates to at least 2 percent by mid-year, from 3 percent now.

http://www.bloomberg.com/apps/news?pid=20601087&sid=arDCe0n94v2I&refer=home

 

I finally figured out what the next hot investment assets are going to be (after the gold bubble pops here shortly).

Bullets, toilet paper, and canned food.

Just kidding. Kind of.

 

WSJ: Inflation May Be Worse Than We Think
http://online.wsj.com/article/SB120407506089695263.html

Of course, some forumites will discount Gold as an indicator, but the reality is, historically, hard money has always beaten paper money, and hard money is THE HEDGE against inflation.

 

It looks like the US slowdown is being felt in Japan

Japan Production Falls 2%, Twice as Much as Predicted

http://www.bloomberg.com/apps/news?pid=20601087&refer=home&sid=aBnIbyDwwgN8

 

Don't be surprised if an ounce of gold buys one unit of the Dow. 1:1 ratio, whatever value that will be. It's happened twice before during similar economic conditions.

 

I was thinking 10:1, I don't know if gold will ever be quite what it once was since we now have shiny rare metals like platinum that can also be used for industrial purposes.

 

It is 13.2 to 1 right now.

We'll hit 10:1 by the end of March.

We're not even halfway through the housing meltdown yet.

 

I am not an expert and I don't want to argue.

IMHO, when you spend money to buy car or new clothes, someone else got that money. The money is still there, it just changed the hands. Even when you spend money for holidays in Thailand, the money is not lost. It just got into somebody else hands.
But when you use the money for destructive purpose the whole world loose the money. Ofcourse the people who makes the warheads make some money. But the loss those war heads create by destruction is hundred times more than that.

I am not trying to say that subprime crisis is not real. Just trying to make a point that, have you not opted for totally unnecesessary war, the economy crisis woudn't hurt you so bad. Just my opinion though.

 

That's the fallacy of the broken window.

But this is totally false. Producing arms is different from producing consumer goods. A bomb does not provide the same kind of social value that a refrigerator does.

As far as reconstruction, it's never wise to blow up someone else's bridges, so you can make work rebuilding them. You'd be better off economically, just fixing your own infrastructure, because this sort of capital investment enables more commerce and market activity. It also of course, adds social value.

Bombing a Serbian bridge and rebuilding it provides little or no social value to someone living in Hoboken.

War does not help the economy because all wars are fought with inflation.

And inflation erodes the value of savings.

And savings constitute capital in a capitalistic system.

So by going to war, not only do you end up destroying social value, you also risk destroying life (from a fairly young adult demographic, ie. the future), you also destroy the foundation of the market to facilitate real growth opportunities.

Making no mention of course that all war debt must be repaid, which also leverages the future.

Just on economic grounds, a very strong case could be made for being strictly antiwar. It's the equivalent of buying furniture on credit, and then burning that furniture to heat the house.

 

Once upon a time when military technology was cheaper and the strategies of insurgency had not been developed, I think the cost:benefit ratio of war was more favorable to the benefit. An armed population with access to common chemicals that can double as explosives completely changes the profit margin. Someone should inform the Pentagon...

 

But if you supply the credit and the furniture that someone else burns it is a win win for you. Society suffers but the creditor and furniture investor profits. If you can find a conflict and place yourself on both sides of it you can prosper off of others misery. It is good investment and evil ethics.

 

Guys,
I am not talking from a US perspective. The US economy slowdown is affecting the whole world.

See things from a global angle. If you bomb iraq or Afgan terrorists demolish twin tower, the world loose money and resource. Instead of rebuilding a broken bridge, the same effort and money can be used to build a new one which will bring more prosperity.

If you consider the whole world as a single country then you will find that every war results in some kind of lose at the end. There might be few people who will succeed in exploiting the war situation or making their oil company rich. But as whole we man kind loose more than what we gain.

 

War only benefits a small percentage of the population. For the overall economy it's bad for the reasons outlined by Guerilla.

For the select few that it does benefit it makes them very rich. Many 10's of and even 100's of thousands of new millionaires are created. In some cases billionaires.

Since the war has started Dick Cheney's net worth has grown by 10's of millions.

For the majority of people and especially the average tax payer or saver/investor it's not good at all.

 

Consumption is still an expense. The US has a $750 billion dollar per year trade deficit

 

John Birch Society - Is Inflation Leading to Panic?
http://www.jbs.org/node/7254

Excerpt

Excellent read!

 

The problem is, you rebuild it, they destroy it again.. You have to do both unfortunately.. Burn the bridge and Build it!

 

U.S. Economy: GDP Rose Less Than Forecast in Fourth Quarter

Some crappy GDP numbers.