I have been accused of being a half glass empty guy when it comes to the current economy. I do think that there are some good things happening, and I do not want to be considered an utter pessimist. I have studied some issues extensively and have tried keeping a neutral bias. One issue that keeps coming up again and again is debt and the health of the US Dollar. It is an issue that I have a real hard time trying to put a positive spin on.
The dollar’s value is a barometer of America’s balance of payments, and currently the balance is out of whack. Great sacrifices will need to be made to correct the situation. It is debatable whether Americans are willing to compromise their standard of living to fix things. The dollar and America’s perpetual debt financing are the most serious issues facing our country right now.
The U.S. Dollar has certainly fallen from grace in the past few years. In fact, it has been dropping now consistently since the end of the year 2000. Is this a good thing?
Yes and no. Here’s what’s vital to understand:
At present, the U.S. has $8.8 trillion in national debt, and its increasing $1.42 billion each day. The U.S. Government is in big trouble… the interest payments alone currently threaten to shut down operations. Congress has shut down before, and in order to make things work, it would simply raise the allowable debt ceiling. The US printing presses are getting a real workout printing all that paper money.
The Government has a plan however… devalue the U.S. dollar, and the debt will be cut in half. You read that right… and unfortunately that is the plan. If you owe someone $1 today, and tomorrow, that dollar is worth 50-cents, you’ve essentially cut your debt in half. But there’s something wrong with this scenario. A falling U.S. dollar only creates inflation, which is a mega-problem in the eyes of policy makers. And, when inflation rears it’s ugly head, the Fed cannot lower interest rates to spur borrowing. Thus, what we begin to see is a double-edged sword, where the money supply begins to tighten, while the greenback loses value. No matter how you slice it, this is a massive problem for the already faltering U.S. economy.
Did you know that ‘par performance’ for the U.S. economy is an annual GDP growth rate of 3%? And did you know that in the first quarter of 2007, U.S. GDP came in at 1.3%; far below where it should be. Let’s face it, the economy is like a very delicate glass house, and once the first stone is thrown, the whole thing could come crumbling down.
Information to put a smile on your face!! Yippy!
So what to do? Get involved by letting your public officials know that the belligerent, reckless spending needs to stop.
Add to your emergency funds some gold bullion or coins. I recommend www.kitco.com
Remember that your highest priority is to keep paying off debt. The government could learn a thing or two by following your good example.
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