The demise of the dollar

[Goose]

You really shouldn't eat at McDonalds dnf. It'll make you fat.

Ponder this...

We'll start fiscal 2010 with $11,776,112,848 of debt and growing.

Unemployment is somewhere north of 20%...and getting worse! Forget the headline number because it's flat-out wrong.

Fannie is bankrupt, Freddy is bankrupt, Social Security is bankrupt, Medicare is bankrupt and Ginnie/FHA are on the brink.

Many, many of our big banks are insolvent as they continue to hide nuclear waste in OBS vehicles. Do you even understand what this means?

And there are upwards of 7,000,000 homes in delayed foreclosure making up a shadow inventory. Ask the bankers who hold the paper why. If you don't get an answer I can tell you.

The Fed is printing money as fast as it can. They've backstopped almost every mortgage created this year and they're buying half the treasurys auctioned this year. We're annualizing at about $5 trillion of debt so far this year.

Stimulus Uno didn't work so how about stimulus dos? Throw in the incredible costs for healthcare and cap and tax.

Do you get the picture? I could go on and on...

And the rest of the world is even worse. What happens to us when the Chinese, Japanese and the United Kingdom (and everybody else who buys US government debt) stops supporting our crack habit! Seriously...what happens?

So I put you in charge. You're the genius. What can possibly be done to save our country?

[Terry Britton]

Pull the plug on the spending machine, and if we can't pay for it, then we can't buy it attitude. If we can't pay for it, forget about a bailout. It will hurt in the short term for a few areas, but the pain will be short and quick. Innovators will get back to innovating. There will be lots of cheap labor to bring manufactoring back to the USA becuase if we can't pay for welfare, then those that want to eat will get to working.

We would stop rewarding failure, and start being competitive again.

I am not saying cut back on all Govt. either, but there is plenty of fat that can be cut to get things running again without running off all businesses. Government has gotten too big, and our long term debt will be dragging us down. We are now the 13th best place to live rather than #1.

[Goose]

I wish you were right Terry but the pain for doing what's right won't be short or quick. It will be brutal because the hole we've dug for ourselves is so deep. But the alternative is the abyss and we're marching straight for it. The math doesn't lie.

Force the banks to recognize all of their losses with all the toxic assets on and off their balance sheets. Many will go under but so be it. (Did I mention the FDIC is involvent, too?) We will never recover as long as these financial institutions continue to hide losses.

And then force an audit of the Fed so we can see how many hundreds of billions of dollars of losses are embedded in their balance sheet. Let's find out what they own and who they got it from. Then maybe we can start to clean them up.

This is not a recession we're in...it's a depression. Did you see the thousands and thousands of people lined up in Detroit the other day for 'free' money. One lady (when asked where this money came from) called it "Obama's stash". And we let her vote!!! This is what we're dealing with. Free money from Obama's stash.

We've been kicking this can down the road for as long as I can remember but it can't be kicked any longer if we want to survive. Personally, I hold out no hope that the politicians or the central bankers will do the right thing. Gird your loins.

[road kill]

This is your third or fourth post recently where you advocate killing people to solve problems.

Those people that wait until they get up to the register before looking at the menu for 5 minutes at McDonalds really annoy me. Do you have any suggestions? Oh, and those old men that drive down the road with their turn siganal on? Are they fair game?

Hey....wait a minute!!>,>,>,

[BonMallari]

This is your third or fourth post recently where you advocate killing people to solve problems.

Those people that wait until they get up to the register before looking at the menu for 5 minutes at McDonalds really annoy me. Do you have any suggestions? Oh, and those old men that drive down the road with their turn siganal on? Are they fair game?

For one thing I use the drive thru at Burger King and I am not your stereotypical Asian driver....I drive a big white 96 chevy suburban

[mjh345]

Could be.......could be you don't understand the scope of that move.

Stan; My greatest hope in life is to one day have the openminded all knowing wisdom that you exhibit daily on the POTUS forum

[badbullgator]

Devalue of the dollar isn't always bad. It may mean that we will start exporting more than we import, and jobs will start moving back to the USA since shipping costs, and buying international will cost more now. I am already seeing some of this with my vendors.

Also, we are probably moving towards a global currency which will cut out the money exchangers making commisions on converting one currency to another.

We are in a global economy now, and there will be flux, winners, and losers.

Sooooo you mean we will print more money to buy our factories back form China, tech support back from India, and bring them back to the good old US of A? Then we will have to get workers to work for the wages they do in those countries of course. And then there is the good old EPA and their view of manufacturing, toss in cap and tax, the additional cost of universal healthcare……
Nope don’t see it happening in the near future, but then again obongo did win a Nobel prize for his vision so maybe he can have a vision that brings industry and manufacturing back here and it too will come true…..
Can you name a few things we might increase export of? Just curious where these increases might come from.

[Uncle Bill]

Some additional fodder FYI. UB

Chronic Depression
by Bill Bonner
London, England


This week, the Australian central bank became the first to declare victory. It raised its key lending rate 0.25% and gave a whoop...signaling an end to the slump. The European Central Bank fidgeted and vaguely threatened to raise rates too. But the Americans stayed in their trenches. New York Fed governor Bill Dudley said that even though the economy is recovering, any rate hikes in the United States would be over his dead body.

Then, word came that even Alan Greenspan thinks a recovery is underway.

"This is what a recovery looks like," said the maestro. That settled the matter as far as we are concerned. Alan Greenspan didn't see history's biggest financial bubble until it exploded in his face. In the following few words we undertake to show that Greenspan is as blind as ever.

"Great time for US consumers, America is on sale," says an item at YahooFinance. The "discounts are unbelievable," adds a blogger known as Frugal Rhode Island Momma. All across the nation, merchants are no longer selling the merits of their products; they're selling price. McDonald's advertises its "dollar meals." Hotels have cut room prices by 20% in the last year. House prices are down about 30% since 2006. Sellers are offering bargains and they want buyers to know it. "Sold for $365,000 in 2006. Now $195,000," says a typical house ad.

Foreigners have noticed too. Colleagues in London say they are thinking of moving to Florida where they will get far more for their money. The dollar falls; foreign purchases go up. Stocks, for example. In the first quarter, foreigners were unloading US shares. Now they're buying more than $100 billion worth per month.

It is a deflationary world, at least that part of the world between the Rio Grande and the 49th parallel. The CPI in the United States is negative and falling faster than at any time in 59 years. Households can only be induced to spend money by cutting prices. "Cash for Clunkers" cut prices on new cars by about 20%. As soon as it ended, so did auto sales. Most new house sales could be traced to a tax credit - which reduced the down payment by at least 20%. That program is scheduled to end in November.

And now, the White House frets about jobs. Unemployment is supposed to be a lagging indicator, but this time it seems to have dropped out of the race all together. Still, Congressional elections are coming up. Unemployed voters are surly and unreliable. So, the Obama administration is considering a $3,000 tax credit to bribe businesses to hire them. If the typical employee costs his firm about $40,000, this effectively reduces the cost of labor by 7.5%.

It's beginning to look more and more like the Roosevelt years. By the end of this year, all the jobs created during the bubble era - 2002- 2007 - will have been eliminated, making it the first decade with no job growth since the '30s. We're expecting a fireside chat any day.
"The authorities still do not understand what is going on. They are used to fooling most of the people most of the time. They think they can dupe them again – with bailouts and boondoggles."
Typically big businesses cut workers in a recession. Then, when the economy recovers, small businesses are quick to take them back. But this is unlike the typical post-war recession. This time, deprived of capital as well as customers, small businesses don't have a chance. Neither does a genuine recovery.

The authorities still do not understand what is going on. They are used to fooling most of the people most of the time. They think they can dupe them again - with bailouts and boondoggles. But real demand has vanished as households try to pay down their debt. That is not going to change anytime soon. Not while the federal government is sabotaging a genuine recovery. It's savings - capital - the US economy needs. A capitalist economy in which the capitalist have no capital won't work. Why is there no capital? Because the feds take it.

Supplying cash-for-this and cash-for-that is an expensive proposition, especially when tax receipts are falling. The money has to come from somewhere. As it turns out, the feds borrow it from the very people who are trying to rebuild their personal balance sheets. Of the $1.6 trillion the US government will borrow this year, the biggest single lender is the private sector, chipping in $700 billion. But instead of being put to use in a way that might stimulate a real recovery - providing credit for small business and consumers - it is taken up by the US government and then frittered away.

The banks are happy to play the government's game too. They can borrow overnight money from the Fed at only one quarter of 1%, annualized. But lending to small business is hard work. And it is risky. Why bother? The US Treasury will pay them 4 % for lending back to the government, long term. This is practically free money to the banks. Both the bankers and politicians end up ahead - with a bigger piece of the economy under their control.

Meanwhile, the real economy staggers. "Drought of credit hampers recovery," summarizes The Wall Street Journal. The United States needs to create a million and a half new jobs each year just to keep up with population growth. Currently there are 15 million people without jobs already...and a couple hundred thousand more unemployed every month. And if this recovery continues long enough there won't be a single person left in America who still has a job.

Even if the economy could be stabilized, it will leave millions without jobs - more or less permanently. Add the people working reduced hours, and those who have been looking for work so long they are no longer counted, and their families, and you have a quarter of the population without money to spend. That's why this slump is not going away any time soon. As in Japan in the '90s, we may have to live with this depression for the rest of our lives.

Enjoy your weekend,

Bill Bonner
The Daily Reckoning

[dnf777]

You really shouldn't eat at McDonalds dnf. It'll make you fat.

Ponder this...

We'll start fiscal 2010 with $11,776,112,848 of debt and growing. Where did we start fiscal 2001?? Therein lies our recent troubles.

Unemployment is somewhere north of 20%...and getting worse! Forget the headline number because it's flat-out wrong.

Fannie is bankrupt, Freddy is bankrupt, Social Security is bankrupt, Medicare is bankrupt and Ginnie/FHA are on the brink.

Many, many of our big banks are insolvent as they continue to hide nuclear waste in OBS vehicles. Do you even understand what this means?

And there are upwards of 7,000,000 homes in delayed foreclosure making up a shadow inventory. Ask the bankers who hold the paper why. If you don't get an answer I can tell you.

The Fed is printing money as fast as it can. They've backstopped almost every mortgage created this year and they're buying half the treasurys auctioned this year. We're annualizing at about $5 trillion of debt so far this year.

Stimulus Uno didn't work so how about stimulus dos? Throw in the incredible costs for healthcare and cap and tax.

Do you get the picture? I could go on and on...

And the rest of the world is even worse. What happens to us when the Chinese, Japanese and the United Kingdom (and everybody else who buys US government debt) stops supporting our crack habit! Seriously...what happens?

So I put you in charge. You're the genius. What can possibly be done to save our country?

I mentioned earlies, I have no friggin' idea. We got ourselvses in deep. As they saying goes, we need to stop diggin, for starters. This is where I am really ticked at Obama for carrying on Bushes outrageous gov't spending policies. The one thing (that we have little control over anymore) is that maybe the rest of the world will slump worse, and we (the dollar) will be relatively saved. We need to start running our national ledger like a responsible homeowner does....with a positive balance at the end of the day. Who was the last president to do that???

Goose, many of us were screaming those SAME points for the last several years, but we were hearing "The fundamentals of the economy are strong!" Now that a republican is out of office, there's a sudden rush to judgement on issues that have been simmering for YEARS! Thankyou for finally acknowledging things ain't so good! We can agree on that.

We can also agee on McDs makine one 'generous'. I've posted my proposals for developing a national "twinkie index" before. I would go so far as a "cap and twinkie act", whereby you buy and sell twinkie credits.

[road kill]

Stan; My greatest hope in life is to one day have the openminded all knowing wisdom that you exhibit daily on the POTUS forum

Why set your sights so low, when the all knowing sole posseser of the truth posts & pontificates here far more than I!!

As far as I know my opinions based on my life and daily experiences as well as my readings and are as valid as anyone elses here.
If you don't like them, you could always insult me, oh, wait........