The Economic Disaster Could be Coming

[rpannier]

Over in Korea all of us expats were surprised (and I must admit I was gladdened a little) as the dollar took a heavy hit this week. The Korea government announced it was going to sell off around 200 million dollars in US currency. Why? Because they have decided it is better to own other currencies. Over the next 10-15 years China, Korea and Japan (3 of the largest holders in US currency, I'm pretty sure they are the 3 largest) are expected to sell off most, if not all, of the US dollars they own. Fortunately it will be a slow bleed because if the US Economy is wrecked, so is their economy. But, analysts predict they will look elsewhere to purchase foreign currency, the Euro and the Pound are two likely places.
They are doing so because the future of US business and the government's ability to meet it's debts are beginning to be doubted. The massive debt has lead Robert Kiyosaki, a self-made multi-millionaire to say, "You're a fool if you invest in the US stock market." Kiyosaki has been investing heavily in China since 1997. He says the reason why he won't invest in the US and why it is in trouble all comes down to three things: The massive US debt, The massive trade deficit and that American businesses are having huge growth, but there is no interest in creating jobs. On CNN Asia, he cited one company that recorded profits of over $100,000,000 and announced it was laying off 1200 people. Why? It increases their profit margin.
The US economy, he says, is in trouble until it gets out of debt and creates more real jobs.
Geeeee....His model for saving the US sounds almost Clintonesque.
BTW: Many analysts estimate the unemployment in the US to be between 9.5 and 13%.
Makes you feel great to be an American don't it?

[Wright Patman]

1. We can't fight wars

as well as continue cutting taxes for the wealthy without going further into debt.

So that's what we will do from now on--fight wars (nu-ku-lar, if necessary) and cut taxes. And we will take the whole world down with us. People do not realize that we are not governed in a "reality-based" manner anymore.

And there is no electoral check on the madmen because they own the voting machines.

[European Socialist]

2. Repukes blame high cost U.S. labor...

But not the bloated salaries of executives-which are way out of wack with the rest of the world.

[Warpy]

4. The strong dollar policy

and keeping it too long was the main problem. Because a living wage in a third world currency translated into an amount in dollars that would not supply enough calories to a US worker (never mind housing, clothing, transportation and medical care) those workers looked much more attractive. The US worker wasn't too expensive. Third world currencies were too cheap.

What we have now is a hollow shell of a country, with entire strategic industries being completely offshored and people here underemployed or unemployed and no longer contributing to government revenues.

The system is unsustainable.

Either the strong dollar should have been abandoned, or the dogma of completely free trade should have been abandoned to keep industries that use the US as their primary market within the US through the use of targeted, punitive tariffs.

As it is, the US is going to be SOL in the next big war. We don't make cloth. We don't make shoes. We don't make the electronics that the military is utterly dependent upon. And we don't make even enough bullets to supply the troops in Iraq.

[PurityOfEssence]

3. It's amazing that so few people seem to get the jobs issue

Two thirds of the US GDP is consumer spending. If people aren't making reasonable money, they can't buy things. I don't say "won't", because the lemming-like consumerism proves that people will buy and buy until the point where they simply "can't" any longer.

The worshiping of money is a sick thing; it's just like the lab rats who keep hitting the cocaine lever to the detriment of all else. The very concept of "enough" is alien to the American mind, and the looting of the future to make the present look rosy is nothing short of destructive. Yay, this quarter's profits are up, but as jobs are shipped overseas, nobody's going to be able to buy the product.

It's insane. Beyond that, it's just plain mean. The sacredness of being able to make and keep as much money as possible is a sick fundamental upon which to build a society, and it is the primary value of ours.

Forgetting the nastiness of that, IT SIMPLY CAN'T BE SUSTAINED.

[FloridaPat]

5. People are using credit cards and refinancing their homes to buy.

That bubble can only go one so long. And military spending is also included in GDP.

[Dcitizen]

6. Korean external shock wont affect the economy.

Daily currency exhange volume is 1.5 trillion, T Bill about 350B.

[rpannier]

7. Dollar has already lost 7% in the past year to the won

Due to Korean unloading of dollars. Japan and China will probably be next to unload.
Besides, the point of my post is, aside from the drop is that people who are making big money do NOT see the dollar or the US Stock Market as the place to be. The numbers of people underemployed, the questionable numbers on who is unemployed and investors and companies that are not interested in creating jobs make up a recipe for economic disaster.