Jolly_Rancher

The Winners Will Be Those Who Look to Gold and Commodities

The U.S. government will not have any trouble servicing its debt. If at some point in the future economic growth fails to produce revenue sufficient to service the debt, the federal government will simply have to cut services. This is exactly what is happening in California and New York right now. Debt in and of itself is not inflationary and does not determine currency value. Government cutting services is deflationary. Currency value is determined by relative cost of inputs to the manufacturing process. Higher labor costs, insurance costs, regulatory costs, environmental costs etc in the U.S. have driven the dollar down over the long term -- until now. The U.S. is in a deflationary period while developing economies like China and India are in an inflationary period. Labor and regulatory costs in China are rising rapidly. Export manufacturing is leaving China now for realms with cheaper input costs. As a matter of fact, there is evidence that a small amount of manufacturing is actually returning from China to the U.S. The last thing I'd buy right now is commodities.


On Nov 09 06:29 PM huskerbob wrote:

> "The bail out programs are not inflationary. They are deflationary."
> Huh? Most people agree that the deleveraging is deflationary, but
> the bailout? How can the creation of trillions of new dollars make
> the dollar stronger, even if they are backed by new debt? Won't
> people begin to lose confidence in our ability to service that debt?
>
> "The price of a commodity will always revert to its value." Doesn't
> everything? What will the value of a dollar be after 5 years? You
> can't expect demand for US debt to continue unabated, especially
> as we need to fund medicare, social security, and our bloated military.
>
> Commodities have real, tangible value and are limited in supply.
> The value of dollars are based on faith in the government and are
> in infinite supply.