That the debt is not a problem so defiantly doesn't seem to be incorrect. The debate, I think should be the consequence of the problem.
I do not buy into some of the concerns like the earth will stop rotating on its axis or there will be a swarm of locusts. There are so many efficiencies that exist that a storm would have to be more than perfect for this to result in economic Armageddon. I am not saying impossible but I am saying unlikely.
Even if we had a depression it would not be the end. The country has come through a couple of depressions. BTW I am not predicting a depression.
What I think we are talking about recessionary magnitude. That the economic cycle is long in the tooth makes it easier for me to be right about a recession coming (a little media trickeration). I do not know how severe or mild the next recession will be. I think it would be on the severe side but that contradicts another cockeyed theory of mine that says as a function of maturation, economic cycles in the US will be generally mild in both directions.
For now I am unable to reconcile my divergent thoughts on this.
One quick note about my dollar down stocks up post from the other day that also drew a lot of chatter, New Zealand may be unfolding in a similar manner as I described could be coming for the US.
Over the last few weeks the NZ 50 and the kiwi currency look like mirror opposites. Pursuant to that first post, my thought was that if this relationship exist it would be short lived.
I still don't know how much this matters, and as David shared, he is not aware of this happening without hyper inflation but for now I will not completely dismiss it either.
3 comments:
Regarding debt versus the devaluation of the dollar, here's a link to Peter Schiff's interview in January on CNBC.
http://www.europac.net/Schiff-MorningCall-1-10-06_lg.asp
This is the argument in a nutshell.
I once had a set of charts of the price of gold in 8 different currencies. What struck me was the chart patterns were dramatically different. If one were doing technical analysis, there would be 8 different conclusions on the trend, one from each chart/currency. How can this be? It's all the frame of reference.
I'm not sure what the ideal frame of reference is to understand the world's economy better. Maybe a basket of currencies. But the price of gold is a time tested standard of wealth, and a look from that reference point is insightful.
I applaud Roger for stirring up the discussion.
On a local financial radio show about asset allocation here in Indianapolis on Sat., the host hinted that the rise in the US equity averages last week was due to progress being made in the congressional budget process. His assertion was that if the House and Senate can agree to further tax cuts and even show some restraint on the spending side that the whole equity basket in the US markets will move up (He said 'like Krakatoa'). IF that is the case, what ETF's would make the most progress in that rising tide? Tom in Indiana
To Tom in Indiana,
Let me be crystal clear that I do not buy into the premise you heard on the radio at all. The market tends to prefer lack of action from Washington.
In an effort to try to answer your question; if you think a big domestic rally is coming then any broad based product will capture the effect.
Not much of an answer I realize but I don't think muh of what you heard on the radio.
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