Perhaps you don't visit the websites I do, so maybe you aren't feeling inundated with ugly forecasts about where the economy is going--if so, lucky you, and forgive me for the doom-and-gloom. But I just thought you ought to know what the non-mainstream economists are saying. Just in case they're right ...
This didn't make me feel any too optimistic:
There will, before long (my best guess is between two and five years from now) be a global dumping of US dollar assets, including US government assets. Old habits die hard. The US dollar and US Treasury bills and bonds are still viewed as a safe haven by many. But learning takes place.
Willem Buiter, a former member of Britain's Monetary Policy Committee (and thus not likely a paranoid fringe element), went on to say
The past eight years of imperial overstretch, hubris and domestic and international abuse of power on the part of the Bush administration has left the US materially weakened financially, economically, politically and morally . . . Even the most hard-nosed, Guantanamo Bay-indifferent potential foreign investor in the US must recognise that its financial system has collapsed.
He's talking about the collapse of the dollar. In this he joins such economists as Peter Schiff, who correctly predicted the bursting of the housing bubble and its morphing into a credit crisis. Schiff believes that the U.S. is about to go through economic times worse than the Great Depression, that there will be civil unrest, and that people will be cold and hungry.
Currency collapses are associated with hyperinflation, which Wikipedia defines as
inflation that is "out of control", a condition in which prices increase rapidly as a currency loses its value. Formal definitions vary from a cumulative inflation rate over three years approaching 100% to "inflation exceeding 50% a month." In informal usage the term is often applied to much lower rates. As a rule of thumb, normal inflation is reported per year, but hyperinflation is often reported for much shorter intervals, often per month.
Economist John Williams predicted back in April that the U.S. could see hyperinflation as early as 2010, but that it is no more than a decade away. He said:
The U.S. government and Federal Reserve already have committed the system to this course through the easy politics of a bottomless pocketbook, the servicing of big-moneyed special interests, and gross mismanagement.
The U.S. has no way of avoiding a financial Armageddon. Bankrupt sovereign states most commonly use the currency printing press as a solution to not having enough money to cover their obligations. The alternative would be for the U.S. to renege on its existing debt and obligations, a solution for modern sovereign states rarely seen outside of governments overthrown in revolution, and a solution with no happier ending than simply printing the needed money. With the creation of massive amounts of new fiat (not backed by gold) dollars will come the eventual complete collapse of the value of the U.S. dollar and related dollar-denominated paper assets.
Looks like hard times ahead, if these guys are right. I fervently hope they aren't.
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