What Future?

An interesting interview on CNBC about the dollar, gold and the fix that the Fed finds itself in. There are a couple of points to be made. 1) The debt is, I believe, substantially greater than the $60 Trillion used in the clip. The social obligations (medicare, social security, etc.) alone greatly exceed this amount. 2) A depreciation of the dollar of 50% is probably not unreasonable in terms of an unstated Fed/government goal. Whether 14 years is a reasonable period to achieve that is moot. Markets rather than the Fed may be the ultimate determinant of the amount and timing of the dollar’s decline. Why would massive holders (China, Japan, etc.) of dollar-denominated assets passively accept this outcome? Regardless, if this scenario plays out, then Americans look forward to having the price of imports dramatically escalating (near 50%) at the same time as the purchasing power of their Social Security is being halved. Whether the future plays out according to this clip or in some other fashion (see previous post today regarding currency), the standard of living in this country is destined to dramatically decrease.

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