⌛ Peso continues to fall

Looks like the feds will try to do anything to jolt the credit market & may be poised to drop the fed rate anywhere from 50 to 100 basis point within a week or so. Doing so will likely help loosen up current credit crunch a bit & prop the stock market--- depending on the level of confidence it brings to Wall Street it may be short lived---Let's hope this won't be the case. And lowering fed rate will certainly halt or even reverse dollar's appreciation in the short term.....but I'd still be long on the dollar for next six to twelve months. If the market reacts positively to the rate drop & stabilized in next few weeks, we may have seen the bottom for DJIA & light at the end of the tunnel will be glowing brighter.

 

U.S. debt now comes to about $59.1 trillion

U.S. debt now comes to about $59.1 trillion, or $516,348 per family of four, a clearly unforgivable burden put on Americans by the government. When our trading partners figure out that we’re no longer solvent, they’ll stop lending us money (that is, they’ll use their dollars to buy Euros or yen or gold rather than U.S. bonds), and the value of the dollar will plunge. As it many U.S. consumer finance companies are on the verge of being ruined, along with their stockholders. The only reason Japan or Europe have been able to generate their current meager rates of growth is the willingness of U.S. consumers to buy their Hondas and BMWs. Now with the credit crunch and loss of jobs Americans are mortgaged to the hilt these imported items will become prohibitively expensive for U.S. consumers, who will respond by buying nothing at all.

Gold was people’s money of choice, for one very good reason: It exists in limited supply, and governments can’t make more of it, so its value tends to be stable. As paper currencies collapse, the world will look for alternatives, one of which is sure to be gold. Massive amounts of global capital will start chasing a very limited supply of gold, sending its value through the roof. Gold's fundamentals are very positive. The world's mines produce about 2,500 tons of gold a year, while demand for gold is currently running about 4,000 tons. And new demand from emerging countries like China and India is soaring.

With the financial markets' anxiety about the dollar and the U.S. monetary and banking system, central banks, led by the U.S. Federal Reserve, have been making up the difference between mine production and gold demand by secretly dumping their gold on the market. They do this by lending their gold for a nominal interest rate to "bullion banks" like JP Morgan Chase and Citigroup,( which is why they can't allow them to fail.) which then sell it and invest the proceeds at higher rates. Because the banks are obligated to return this gold to the central banks, they're "short" the metal. At some point in the future they have to buy this gold back on the open market. If gold's price is low, they make money, and if it's high, they lose. Since it's currently high and rising, these banks are looking at multi-billion dollar losses


The Fear Index is flashing a "buy Gold" signal

 

What makes the U.S. special? As a percentage of GDP, the U.S. debt is a ways down the list.

List of countries by public debt - Wikipedia, the free encyclopedia

I believe Japan has a national debt which rivals that of the U.S.

Japan's national debt up to 836 trillion yen at end of June - Japan News Review

 

Yes, $519,000 sounds like astronomical….

But let’s take that under perspective….

Average worker in the US contributes roughly $75,000 to $80,000 of productivity into GDP annually, this equates to a minimum $150,000 to $160,000 per household of four per year (I believe more than half of US populations are employed). So the $519K would amount to about 3+ years of GDP per household, I would hardly consider that as being insolvent or a lifetime worth of debt…..

 

atlarge: I think you need to recalculate. These numbers are from the US Census.

Persons per household , 2000 2.59
Per capita money income , 2007 using atlas method $46,040

Seems many believe that it's ok to have fiat currency and deficit spending. Are you sure this is good in the long run? I don't think we should have an in-depth debate on the issue here since this is supposed to be about the Peso losing value (though I do understand all these things are interrelated). I would like to challenge all of you to take some time to examine both sides of the issue (state capitalism vs. free market). We only seem to get one side.

 

Timn8ster, I was using the average household of four given by Teacher. Also the GDP number I was using is based on per worker, not per capita. Ok, now if we were to use 2.59 persons per household based on US census instead of 4 per household, it would bring average household debt down from $519k to $336K. If we use per capita (as you would) to calculate----$46,000 x 2.59 per household.....that would be $119k contribution to GDP per household per year, take $336k total debt & divide by $119k per year it would bring the number down further to 2.82 years (lower than the 3+ years I stated earlier).

With regards to deficit spending, I'm with you 100%---I'm against irresponsible & wasteful spending by our government. However, I do feel we need to bring things under perspective.

 

I know MR. Doom and Gloom

I always look at things in their worst possible way, because it can only get better from my view point, can’t possible become worse. Things at this point look grim to say the least. However I still believe in Gold it is a winner, the safest bet in my book. To trust the people that put us in this mess with my money again. I lost little only about ten thousand but for me it was too much to lose. I know this is tread is about the peso falling however the fall is tied to dollar without the dollar how can you judge the peso. But in the financial markets information I really like atlargex’s information. Always makes me feel hopeful. But timn8ter has good stuff to as well as DUDE. Always interesting to read everyone’s points

 

corporatism

Timn8ter this subject is a can of worms “State capitalism” or corporatism is the exact opposite to free market capitalism is always the result of free market activity and are not necessarily true, and any claims that any capitalistic activity is the result of free market policies needs to be judged solely on objective criteria of the free market itself. A free market is a place where individuals and groups of individuals come together to transact voluntary exchanges without any backing of government force.

So in a way America has become a modern socialist democracy, why? Simply the government will now hold stock in the corporations so they are government owned or controlled even if only in part. Due to the failure of communism, most communist nations are moving away from a state ownership to state control economic versions. So what now? every country is a socialist democracy!

Or should we call it for what it is fascism! The difference between communism and fascism, which are both state socialistic governments, is that communism is complete state ownership, while fascism is complete state control. Both are opposes of the true free market.

 

Be Careful!

The use of the term "facism" evokes emotional reactions, images of goose-stepping soldiers and Mussolini speeches. Thinking of it in strict economic terms helps take the emotionalism out of it.
Yes, it's a "can of worms" and can trigger very heated debates which is why I encourage individuals to take up the research with an open mind and decide for themselves.
Look into the subjects of "state capitalism", "fiat currency", "free market", "laissez-faire" and compare Keynesian economic theory to Austrian economic theory, if you care to.
Of course, all this academia is very interesting to some, but we still have to do our best to survive within the current system which is why I've enjoyed reading others insights in this thread. Keep it up!

 

So what can we do?

Economic theories are constantly changing Keynesian, Marxist, Marginalist and Supply-side Economics. Despite the enormous differences between the Past and now, the economic problems with which we struggle remain the same. All the economic theories in the world have made no difference and we are still asking the same questions.

Fiat Currency has no value, except by virtue of a government decree. But here is where it gets really strange the Federal Reserve is a private Corporation. The members are private banking corporations. The Federal Reserve Notes are backed by the power of congress to lay tax on the people (This is where we get the buy now, pay later thing from right?) for the lack of better words the dollar is “created out of thin air”

If I’m not mistaking the Federal Reserve Act was passed (on Christmas Eve) in 1913, it transferred the power to create and issue of our nation’s currency and to regulate the value thereof from Congress to a Private corporation. And my country now borrows what should be our own money from the Federal Reserve (a private corporation) plus interest. If this is correct and the debt can never be paid off under the current monetary system that we have in America.

Something else interesting

But according to the US Treasury, the Federal Reserve pays $20.60 per 1,000 denomination or a little over two cents for a $100.00 bill. It is a tremendous gain don’t you think?

Under the Constitution, It does NOT provide that any power granted can be transferred to a private corporation. Doesn’t it specifically state, all other powers not granted are reserved to the States and to the citizens? Does that mean to a private corporation? Should we borrow our own money from a private consortium of bankers? Isn’t this why we had a revolution, created a separate sovereign nation and a Bill of Rights?

"laissez-faire" or "hands off, let alone, or let pass or let it be " That has been Pres. Bush’s economic theory all along and again we are still no better off than we were. So Timn8ter what do you propose we do? I have many facts but no idea’s