Tuesday, September 8, 2009

The Falling Dollar: Something All of Us Should Be Concerned About



AS THE US DOLLAR continues falling back to March 2008 lows and perhaps below, I'm certain several inevitabilities will occur. Below are a few:

1. We're starting a new round of bubbles: A new rush to commodities and read goods that will hold their value if the dollar continues to fall. Notice the new rally in oil and gas stocks, gold, silver and other precious metals. Haven't we been here before? And don't we know how this nightmare ends.

2. The purchasing power of the American consumer is shrinking, even as the price of real goods increases. This will put the consumer in a very grumpy mood. Does anyone remember the last few years of the Bush administration? Here we go again.

3. Interest rates or yields will rise. No other way. It's what happens in inflationary times. And higher rates is the only way we can get any foreign countries to keep buying into our national debt.

4. Mortgage rates for homeowners will rise higher, since they are tied to long-term bond rates and not to short-term rates the Federal controls. Don't be fooled when the Fed lowers rates to zero, it won't affect your credit cards or your mortgage rates.

5. President Obama will be a one-term president becoming just as unpopular or more so than Jimmy Carter and George Bush just to name a few who also presided over a falling dollar.

6. Out-of-control Congressional spending will cause us to print more money---eroding our purchasing power--- and, also cause more printing presses to have to be built causing the erosion to explode exponentially. Even if some of these ghastly bills pass, they could quickly collapse the economy for decades and certainly the stop any possibility recovery. Have you ever considered $15/gallon gas? And it could be much higher.

7. Foreign governments will become increasingly alarmed at our out-of-control spending and threaten to dump the dollar altogether and replace it with a global currency of some kind. This could trigger a worldwide financial crisis of unheralded proportions.

8. Everyone with money and long-term savings in the bank for rainy days and future needs will find it shrinking. $100,000 in the bank will only buy $50,000 or less worth goods and services, even as prices rise to the stratosphere.

There are many things we could worry about over the next few months and years---swine flu, a nuclear Iran, nationalized healthcare (that almost no one wants) just to name a few. But if the dollar continues to fall to lower and lower levels, we could see a crisis that will make all others pale in comparison.

The Federal Reserve and Treasury are happy at the moment that the dollar is falling, because it's pushing our bruised dollars back into the stock market--- for now. But don't be fooled: if the dollar continues its downward spiral, the stock market will soon come tumbling down again too.

We should all be very concerned and more than anything else we must make our voices known in Washington: No nationalized healthcare---there is no way this country can begin to afford it, cut spending across the board, begin to pay off debt and get our financial ship headed away from the gigantic iceberg it's heading for. Time is getting shorter and shorter. We should be concerned that a huge crash is coming unless we make our voices heard.

We cannot spend and tax and borrow and print our way back to prosperity. No matter how nice it looks all around us. We can't let this blow over, because it won't blow over. We are heading over a cliff. And when we get to the edge, it will be too late.

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