Spence wrote:Eric wrote:Of course 12 weeks won't erase it, but once the guvmint releases the money they have stored (much of the stimulus hasn't been tapped into), inflation will absolutely skyrocket. The debt combined with the unregulated printing of money will make the value of the dollar pretty much plummet. It would have been nice to throw that trillion that Obama just spent at our national debt.
The dollar has already plummeted to almost $1.36 against the euro and $1.45 against British pound. This week the dollar had the biggest drop in over 24 years. This makes everything we buy from other countries more expensive. It inflates the cost of everything. In the short term it will make our products more attractive internationally, but we get most of our money for deficit spending from China. As our debt grows to a point where they believe we can't manage it, they will charge us more interest to secure the loan because our credit rating as a country will go down. Then the government will be spending almost every thing brought in by taxes every year to manage the debt. That means taxes will have to be raised to cover the cost of just keeping the government open for business. Lots of state governments are going through this right now. California is bankrupt, they have a terrible credit rating and they are having a hard time securing credit because they can't pay their debt. That will mirror what will happen to us nationally. The bad thing about this is that our politicians know exactly what is going to happen and they are too worried about being elected in a couple years to care. That is why they shouldn't be elected in a couple of years.
I hang some hope on our reduced exchange rate along with 2 others factors greatly increasing the sale of US products and products with higher percentages of US manufacturing and engineering bases. The 2 other factors, employment reduction spurring productivity increases as they always do and thus reducing the production cost of our goods and services. And the recovery will surely be tied to global production increases and this will let petroleum prices raise concurrently and probably to levels exceeding highs we have seen. I think the cumulative effect could make the real price of US goods 35% cheaper or more. More boost should be realized in the 6 to 18 month post trough period in real US wages which will be lowered as individuals always accept less pay to keep working or get back to work and there is a lag in the recovery of these wages. Infrastructure development and renovation also help to reduce wast and thereby costs in most things in the commercial-industrial sectors. Additionally, residuals from federal stimulus that go to business in the form of reduced taxes for expansionary investment and government backed loans could further productivity enhancements and reduce production cuts. One rolling we should see very sizable demand increases for our goods, especially internally (us buying US goods from right her at home).
