LCACM

October 9, 2008: Remember the Date - This is Huge

During the last 2 decades most of the Capital Spending growth has happened in foreign countries and not in US. As a result the US worker does not have the productivity edge they enjoyed 20 years ago. The result of this is that their job prospects and consequently credit ratings have become much lower, and we see the consequences. There are only 2 ways to sort this out a) Longer term solution would be to impose tariffs proportional to the wage differential between US and it's trading partners. Goods from Europe will see much lower tariffs compared to those from Communist China where slave wages are paid. b) The other is to devalue the US currency via Bailout induced liquidity injections, so that the US real wages tend towards those of Communist China. Free Market ideological rigidity precludes Solution (a) so Solution (b) is being tried. This will lead to yet another liquidity bubble similar to the Internet Bubble and the Housing bubble, only larger in magnitude and more severe in its consequences.