Bad Dog

Will Stimulus Have Positive Effect on the USD?

One of the increasingly obvious things that I see out in the regular world is the depth of very real fear in ordinary people. That fear is closing wallets and crushing spending. Until we can give people a sense that someone is in control and putting a floor under this economy, we will not see any recovery. In fact, we will see an accelerating decline. So I agree with Axelrod that happy days may not be around the corner, but failing to do anything would be very much worse.
The interesting thing about some of the comments you hear about the spending package is its size and its priorities. To those people, it is necessary to point out that in 1941, the USA paid millions of Americans to build and man machines that were sent halfway across the world to be blown up, shot down or sunk. At the end of the war, the US debt was about 120% of GDP, around $17 trillion in today's money. The conservative arguments of today would suggest that 1946 America would have been desperately poor and the country ruined. Of course, it wasn't and in fact entered into an economic golden age where technology and education raced ahead, and huge government infrastructure projects like the NIH and the interstate highway system were developed. At the same time, we rebuilt Europe! If the conservative arguments about spending are so good today, let them explain 1946 America.

The End of Gold, Part Three

How will it accomplish this 50% devaluation?


On Feb 11 12:46 PM lance sjogren wrote:

> I don't subscribe to the hyperinflation scenario.
>
> I believe the US will devalue the dollar about 50% over the next
> 4 years, and then work extremely hard to strengthen the dollar so
> that it doesn't fall further.
>
> A 50% devaluation of the dollar will wring out a lot of excesses
> in the system. The mountain of debt of different forms (govt, consumer)
> that the US currently has is far too big to pay off. There are two
> alternatives, one is for the US simply to default, the other is to
> devalue the dollar to the point where our debt burden becomes manageable.
> The latter is the obvious course. That is the cours the treasury
> and Fed are embarked on even if they probably would never say so
> and may not even be aware that is what they are doing.
>
> Gold should do well over the next 3-5 years. Once the dollar stabilizes
> at its lower level then gold will probably flatten out or decline
> slightly.