Wednesday, May 4, 2011

U.S. Dollar Drop Quick Fix, Won't Solve Anything

This commentary is an interesting one, as it comes from a Website that's both goldbug-friendly and left-wing. It described the debasement of the greenback as a quick-fix stopgap that's being used to avoid the structural problems with the U.S. economy.
Dollar weakness that has continued will continue. That is to make US goods cheaper and more saleable as exports, but the flip side is that imported goods are more expensive and that creates inflation. Such a policy is foolhardy versus foreign nations that have export advantages....

Price fixing is an exercise in futility and so is a course of mandatory wage increases pursued to play catch up with runaway inflation. Even though higher numbers show sales growth they are misleading and only a reflection of higher pressing inflation. This is not economic growth; it is price inflation. Such an exercise is geared to keep people and business solvent, but in the long term it accelerates inflation and leads to worse problems down the road. The economy is exhibiting deterioration at the edges and that is to be expected for an economy that has been so badly misused. What is left of manufacturing is in decline and until the system is purged such deterioration will continue....

The proliferation of fiscal debt will continue, as will the exorbitant creation of money and credit. They cannot stop. If they do the system will collapse. That will happen, but only when those driving and controlling the system allow it to do so. We have just witnessed the disinformation calculated to deceive the public into believing that there is a recovery afoot. Nothing could be further from the truth. What little upside that was seen was a lift via price inflation. When figures are released there is never an addendum explaining that if inflation were removed, what the statistics would really be. That is why we have a 5 to 10 year bull market in gold and silver ahead of us, whose presence is so powerful that no governments or central banks can regulate, suppress or overwhelm it....
The author is one of those people who think that global trade is unbalanced, and recommends tariffs as a fix. He also recommends regulatory reform of the banking sector.

Free traders won't like it, but he has a point when it comes to the debasement fix. Needless to say: if competitive devaluation is the new way to kick the can down the road, then gold will keep going up.

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