Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
Is Crude Oil Firmly on the Upswing Now? - 20th Feb 20
What Can Stop the Stocks Bull – Or At Least, Make It Pause? - 20th Feb 20
Trump and Economic News That Drive Gold, Not Just Coronavirus - 20th Feb 20
Coronavirus COVID19 UK Infection Prevention, Boosting Immune Systems, Birmingham, Sheffield - 20th Feb 20
Silver’s Valuable Insights Into the Upcoming PMs Rally - 20th Feb 20
Coronavirus Coming Storm Act Now to Protect Yourselves and Family to Survive COVID-19 Pandemic - 19th Feb 20
Future Silver Prices Will Shock People, and They’ll Kick Themselves for Not Buying Under $20… - 19th Feb 20
What Alexis Kennedy Learned from Launching Cultist Simulator - 19th Feb 20
Stock Market Potential Short-term top - 18th Feb 20
Coronavirus Fourth Turning - No One Gets Out Of Here Alive! - 18th Feb 20
The Stocks Hit Worst From the Coronavirus - 18th Feb 20
Tips on Pest Control: How to Prevent Pests and Rodents - 18th Feb 20
Buying a Custom Built Gaming PC From Overclockers.co.uk - 1. Delivery and Unboxing - 17th Feb 20
BAIDU (BIDU) Illustrates Why You Should NOT Invest in Chinese Stocks - 17th Feb 20
Financial Markets News Report: February 17, 2020 - February 21, 2020 - 17th Feb 20
NVIDIA (NVDA) GPU King For AI Mega-trend Tech Stocks Investing 2020 - 17th Feb 20
Stock Market Bubble - No One Gets Out Of Here Alive! - 17th Feb 20
British Pound GBP Trend Forecast 2020 - 16th Feb 20
SAMSUNG AI Mega-trend Tech Stocks Investing 2020 - 16th Feb 20
Ignore the Polls, the Markets Have Already Told You Who Wins in 2020 - 16th Feb 20
UK Coronavirus COVID-19 Pandemic WARNING! Sheffield, Manchester, Birmingham Outbreaks Probable - 16th Feb 20
iShares Nasdaq Biotechnology ETF IBB AI Mega-trend Tech Stocks Investing 2020 - 15th Feb 20
Gold Stocks Still Stalled - 15th Feb 20
Is The Technology Stocks Sector Setting Up For A Crash? - 15th Feb 20
UK Calm Before Corona Virus Storm - Infections Forecast into End March 2020 - 15th Feb 20
The Growing Weaponization of Space - 14th Feb 20
Will the 2020s Be Good or Bad for the Gold Market? - 14th Feb 20
Predictive Modeling Suggests Gold Price Will Break Above $1650 Within 15~30 Days - 14th Feb 20
UK Coronavirus COVID-19 Infections and Deaths Trend Forecast 2020 - 14th Feb 20
Coronavirus, Powell and Gold - 14th Feb 20
How the Corona Virus is Affecting Global Stock Markets - 14th Feb 20
British Pound GBP Trend and Elliott Wave Analysis - 13th Feb 20
Owning and Driving a Land Rover Discovery Sport in 2020 - 2 YEAR Review - 13th Feb 20
Shipping Rates Plunge, Commodities and Stocks May Follow - 13th Feb 20
Powell says Fed will aggressively use QE to fight next recession - 13th Feb 20
PALLADIUM - THIS Is What a Run on the Bank for Precious Metals Looks Like… - 13th Feb 20
Bitcoin: "Is it too late to get in?" Get Answers Now - 13th Feb 20
China Coronavirus Infections Soar by 1/3rd to 60,000, Deaths Jump to 1,367 - 13th Feb 20
Crude Oil Price Action – Like a Coiled Spring Already? - 13th Feb 20
China Under Reporting Coronavirus COVID-19 Infections, Africa and South America Hidden Outbreaks - 12th Feb 20
Will USD X Decline About to Trigger Precious Metals Rally - 12th Feb 20
Copper Market is a Coiled Spring - 12th Feb 20
Dow Theory Stock Market Warning from the Utilities Index - 12th Feb 20
How to Get Virgin Media Engineers to FIX Hub 3.0 Problems and NOT BS Customers - 12th Feb 20
China Under Reporting Coronavirus COVID-19 Infections by 66% Due to Capacity Constraints - 12th Feb 20
Is Coronavirus the Black Swan That Takes Gold To-Da-Moon? - 12th Feb 20
Stock Market 2020 – A Close Look At What To Expect - 12th Feb 20
IBM AI Mega-trend Tech Stocks Investing 2020 - 11th Feb 20
The US Dollar’s Subtle Message for Gold - 11th Feb 20
What All To Do Before Opening A Bank Account For Your Business - 11th Feb 20
How and When to Enter Day Trades & Swing Trade For Maximum Gains - 11th Feb 20
The Great Stock Market Dichotomy - 11th Feb 20
Stock Market Sector Rotation Should Peak Within 60+ Days – Part II - 11th Feb 20
CoronaVirus Pandemic Stocks Bear Market Risk 2020? - Video - 11th Feb 20

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

America's Difficult but Not Impossible Economic Transition

Economics / Recession 2008 - 2010 Feb 12, 2009 - 09:12 AM GMT

By: Chris_Galakoutis

Economics Best Financial Markets Analysis ArticleThere can be no denying the long history of greatness for America. Whether it be the election to its highest office of a leader who not only flung a long-shut door wide open, but ripped it off its hinges, or an American jetliner crew who safely crash lands a plane onto a frigid New York river, we are reminded of America's greatness every day.


The rock star Bono, lead singer of the Irish band U2, once remarked that an appeal to the greatness of America, more than anything else, gets Americans to stand up and listen; that the idea of greatness might be hardwired into America. The Nineteenth century French historian Alexis de Tocqueville added a qualification, when he wrote following an 1831 visit that "the greatness of America lies not in being more enlightened than any other nation, but rather in her ability to repair her faults."

America's economic faults have been chronicled on our pages and others in great detail for many years. Ever since the generation that endured the great depression, there had been no subsequent era that had dispensed commensurate pain or hardship; instead, generations that followed rode a long wave of prosperity that many believed to be a birthright. If market psychology is a product of environment, then the relative calm over the years helped to soften people up, as it were, inspiring a false sense of security for investors -- both domestic and foreign -- of US assets.

Environments are not static but swing back and forth in waves that can last many years, hitting extremes on either end of the spectrum. The US hit a prosperity extreme -- if measured by stock and real estate values -- this past decade even though Americans' real wages have stagnated for years. Columnist Paul Craig Roberts and others like Lou Dobbs have shown repeatedly how the off shoring of American jobs to low cost foreign countries has contributed greatly to this, as it increased US unemployment and those with jobs were not demanding pay increases.

Consequently, the steadily rising costs for life's necessities, with no commensurate rise in real wages, meant the shortfall had to plugged by debt – the same debt that today is crippling the nation. A prosperity wave built on a foundation of debt can, as we have all learned, come crashing down at any time, as ever-increasing debt levels are simply unsustainable. Debt must be repaid, preferably by way of an income stream derived from production and other investments. Conversely, borrowing to consume provides no income stream, and in fact only strains existing ones, by increasing monthly service payments.

If free market forces provided opportunities for the manufacturing of products in China at one-tenth the cost of the US, those same forces were most certainly not evident in the foreign exchange markets. With that arbitrage legally available, however, profit-seeking enterprises, encouraged by the Wall Street champions of free-market principles, naturally looked to China and other low cost centers for the benefit of their shareholders.

The only problem is that these free-market cheerleaders acted like wolves in sheep's clothing. They need to shed the veil of hypocrisy and come clean. Rather than picking and choosing, they should embrace free market principles as a whole, and be just as adamant that exchange rates be free to adjust as necessary; if exchange rates were truly allowed to be set by the free market, it would undoubtedly slow if not reverse the off shoring trend that has so hurt the American worker (China should not be scapegoated in that respect, as the fixing of exchange rates to the US dollar is a much larger issue than most realize.)

The way forward is one where with the necessary changes, particularly in the foreign exchange market, investment in the US becomes attractive again, and jobs return, narrowing the trade deficit. This will also help reduce the budget deficit since fewer Americans would be looking to government for financial assistance. The size of government must also be cut, reducing government expenditures, which would eventually allow for tax rates to fall, spurring supply-side economic activity.

Tax rates that are currently very attractive, such as the 15% rate on qualified dividends, must be made permanent. This would encourage investment in America's finest companies, and provide income for retirees with a built in inflation hedge. This may also alleviate some of the pressure on government that is surely around the corner with respect to entitlement programs.

But what we are most likely to get is more of the same. Apparently we “reward” the teenager who crashed mom's car by giving him the keys to our Mercedes. More spending in search of a temporary stimulus, to be financed by additional debt or money printing, while maintaining the status quo, will only make matters worse in the long run. Akin to a punch to the face dislodging a pinched nerve of the neck, the pinched nerve probably returns, and you may have a broken nose to tend to as well.

It is our belief the economy will get worse in the short to intermediate term, and as such we must protect our purchasing power from the inevitable dollar decline that will be forced upon the market at some point. The way we do that is by owning gold and silver, the only real money that is no one else's liability. The framers of the US Constitution understood this all too well.

Finally, we have been accused of publishing commentary detrimental to the well being of the US. Let us be clear that there is no doubt in our mind that the American spirit and ingenuity that built this nation into a great nation will persevere and pull this nation out of its current travails. Getting from here to there won't be easy, however, and we should look to ways that won't prolong the pain. All we can do, along with others of like mind, is not be afraid to speak the truth as we believe it to be, in the hope the message reaches Washington D.C. and President Obama.

By Christopher G. Galakoutis

CMI Ventures LLC
Westport, CT,
USA Website: www.murkymarkets.com
Email: info@murkymarkets.com

© 2005-2009 Christopher G. Galakoutis

Christopher G Galakoutis is an independent investor and commentator, who in 2002 re-directed his attention to studying the macroeconomic issues that he believed would impact the United States, and the world, for many years to come. He works diligently to seek out investments for his own portfolio that align with his views, and writes about them on his website. With a background in international tax, he also works with clients holding foreign investments (ExpatTaxPros.com), ensuring their global income tax costs are being minimized.

Christopher Galakoutis  Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules