Tuesday, August 07, 2007

The Looming Economic Meltdown

This is the first article (but probably not the last) where China is making overt threats about selling its holdings in US currency:

He Fan, an official at the Chinese Academy of Social Sciences, went even further today, letting it be known that Beijing had the power to set off a dollar collapse if it choose to do so.

"China has accumulated a large sum of US dollars. Such a big sum, of which a considerable portion is in US treasury bonds, contributes a great deal to maintaining the position of the dollar as a reserve currency. Russia, Switzerland, and several other countries have reduced the their dollar holdings.
"China is unlikely to follow suit as long as the yuan's exchange rate is stable against the dollar. The Chinese central bank will be forced to sell dollars once the yuan appreciated dramatically, which might lead to a mass depreciation of the dollar," he told China Daily.

It's all coming together, at some point on the "event horizon" (I'm guessing September or October) there will be an economic collapse unlike anything we've seen since the Great Depression. Some additional opinion courtesy of Randolphus Maximus (booyah!!).:

  • The subprime mortgage collapse is not where it stops, you are going to see "prime" borrowers following suit.
  • There is going to be a massive stock market correction, also in September or October. There might be additional highs reached before then, but like I said in a previous post. Get your shit ready.
  • "Product recalls" of everything from pet food to toys that use lead based paint are some examples of our "economic sanctions" that we've lobbed towards are largest trading partner. Look for more of that as well as increased scrutiny of other Chinese products.
  • As well as a continued move away from the dollar as the world's reserve currency. The dollar has continued its freefall against the Euro. We accuse China of currency manipulation but we have done the same thing for the last few years. Since the government stopped publishing official M3 numbers. No one knows exactly what the money supply "officially" is.
What does all of this mean? The party might be over for us, and the bills are coming due. We have reached a point where even China is starting to say we're maxed out. Our reaction is "we don't want your crap anyway". Someone is going to lose out and I'm guessing since we don't hold any cards, it's us. Put your money into gold or bicycles, or put it into international assets (while you still can). The sky is falling. This "is the big one" like Fred Sanford used to say.

All is not lost, yet. Our economy, our people, our entrepreneurial spirit can recover fairly quickly if the government will get the hell out of the way. It's probably not going to happen.

UNLESS YOU ELECT RON PAUL for President.

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22 comments:

Anonymous said...

Although I am posting nearly a year after your blog, I wish to thank you for your well thought out blog posting.

I have been predicting for at least the last 6 years that our economy was headed down this hole that we are facing. I had in fact began putting my money into Gold in 2004. And although I no longer have the gold, as I went through Hurricane Katrina and Rita and it is what helped me re-locate and regain my footing in life, I am still glad that I was one of those that has been following this for quite sometime.

Our economy is going to sink even farther down this shaft, and many, including myself are not prepared for tihs. I would have been if had not been for the lovely Hurricanes, but the fact is, is that now I am not prepared, and afraid.
Many Americans do not realize the full implication of everything that is going on in our Country.
We have an impending food shortage, which will be caused by our Gasoline / Oil sitution.
Our corn, wheat, and soy crops growth have been severly retarded this year.
Corn is used to make ethanol which is used in making Gas, it is also used to feed cattle, chickens, pigs, and farm raised fish.
Which then effects our beef, milk, dairy, our eggs, everything....even down to our pet foods.
How many people actually stop and think about what it takes to make our food products ? I mean even for a jar of mayo we need corn and soy growth, the eggs in it, the soy in it, the oil in it.... or how about that cold beer that they enjoy on a hot afternoon.... has wheat hops in it....
The plastic bags, and plastic containers for our shampoo and trash can liners.....all use petroleum to be produced.
How many realize that the money that is being circulated for the economic stimlus checks was money borrowed by out Government from China ? I mean we are supposed to be the richest country in the world, with plentiful monies for Social Security tucked away....then why did we have to borrow money from the Chinese to help our own country ?
We are headed for big disaster, and it doesn't seem as though there are any rays of hope shining through anymore.
I know that I am scared...I am a single Mom to three kids living in one of the hardest hit regions in our country...Las Vegas....and I am afraid, that even with all of my knowledge and know how that I might not be able to make it through this..... and that just scares the hell out of me....

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