Great Depression Two

Well starting out the Dow dropped 112 points, S&P drops a worrisome 14 points, Labor Department declared today highest rate of job losses since 1945, China expected to buy over 1 billion in US debt, Commodity prices keep declining drastically, even Oil amazingly gone down by 8 dollars in two days as the per barrel of oil is 39 dollars a barrel. One blow to all Americans today is the spiraling down Jones but more seriously than that, the US dollar as we know it dropped against the rising Euro, Swiss Franc, and even weakening against a stronger UK pound sterling. Many reason account for the last few weeks in Federal expenditures, rise in spending on expanding overseas forces in Iraq & Afghanistan, a horrible loss of jobs this past week making investors even more leery about buying US dollars, uncontrolled spending on state programs, Congress appropriating several bailout bills in several billions expected for Obama to sign immediately in office next week, and consumer spending in apparel, electronics, dropped considerably low this week causing more job losses.

The list being drawn up by a house conquered by Democrats have a bill for an Auto Industry bailout, Emergency funds for Mortgage & financial institutions, even a proposal for 5billion dollar bailout of the Porn Industry, expected to have strong opposition from key conservatives in congress. So far the current stimulus package directed for the following borrowers, 10 states deep in debt to continue state welfare programs, 700 billion in Tax cuts across the nation, the plan a longtime devised by the Obama administration would give around 1000 to 1500 to middle class families, will individuals would receive a 500 to 700 relief tax cut. Logically with the message the markets are showing the nation every day, the dollar fell a full percent against all other major currencies, printing more money for bailouts on zero interest rates would make purchasing power of money triple downwards, making store prices everywhere jack up, as US money supply is large & get’s larger the and stuff is cheaper to buy, stores raise prices to keep more on the shelves. For investors investing in the US dollar depending on the demand of a currency, due to the total amount of capital invested in a currency, if the Fed keeps on printing & printing more money, then the market is flooded and the value would significantly dropped due to the amount available in the market.

Also when there are fixed interest rates on fiat currencies, with plenty of money being pumped into the economy, prices are raised, credit is cheaper to loan out to due to raise in salaries, homes, apartments, and such would be cheap to purchase.

But due to investor confidence, the large money supply, and cheap credit were playing factors in mortgage & credit crisis were now in. Mortgage companies gave so many loans at cheap interest rates for large majorities of people to buy, such as buying Mortgages, that people’s salaries weren’t enough to pay off all the major companies. Well there’ s more contributing to this slowing economy than most people think such as, the manufacturing competition between southeast Asia & America, the total cost of Federal spending which was never controlled, never ending borrowing of Foreign Credit & money, and the Cheap credit devised by the US treasury. In country with a Fiat currency, uncontrolled government spending, and a cheap flow of money, it eventually becomes less valuable, consumer confidence wanes, and the amount investor’s buys are US keeps are dollar stable.

As for Mr.Obama he faces more than a challenge than fixing the economy, creating jobs, and bailing out private companies. Options laid out by prestigious economists say maybe Iran’s and even Russia’s idea of going back to gold back money system may save the economies from immediate collapse. Last Iran bought 55billions dollars worth of gold reserves in Europe transporting it to Iran, backing there currency on a gold based system, gold has stood the test of time there is no doubt about that. It hold investors confidence, still contains its intrinsic value, it keeps a tight budget for government spending, taxation is limited as well, and it reinstituting it would create significant labor in mining for private industry.

As for now there does seem to be no end in sight, more spending, taxing, borrowing, create cheap credit, issue more treasury notes never to be repaid by the young generation of North Americans. History will catch up with America’s fateful decisions, example of the Nationalist’ Chinese against the Communist’s in the 1930’s, Nationalist’s being current regime paid their Army in Fiat currency that kept being printed at unprecedented rates for their, food rations, armaments, and so on. Yet just like every piece of paper that is called valuable did not buy the food for soldier’s families, causing starving throughout the lands, this gave an opportunity for Mao’s communists. To take advantage of the situation, Mao seized silver mines in the north, allowing them to pay Nationalist soldiers in silver dollars, thus causing a change in turning the country over to the Communist’s side. They could feed the people, farmers & foreign exporters would accept silver as legitimate payment, it was used worldwide then.
To give you my one piece of advice I always keep, remind myself of is, what to invest I, well easy, gold & silver. Private equity, mutual funds, insurance policies, and treasury notes are susceptible to squandering, government seizing company funds, fail easily, to risky, and the sooner the collapse comes get your silver dollars & gold coins ready.