Dec 10, 2007

Economics for the Future

I'm far from being an economist and so tend to read and listen to people I trust. Pat Buchanan's recent columns on "Sinking Dollar, Sinking Country" and the "Crash of 2008" can be compared to the advice of market timing giants such as Bob Brinker who believe that this is a bull market. Real assets on the market will rise simply because they are priced by the declining dollar--over 50 percent in the past seven years in comparison with the Euro, and a similar decline with respect to other currencies not tied to the dollar. People who live on a week-to-week paycheck and month-to-month payments are going to be affected by a loss of purchasing power that is associated with a less valuable dollar.

Buchanan summarizes two ways that the Fed can partially deal with U.S. economic problems:
If a recession is generally a sign the Fed should loosen up, a run on the dollar is a sign the Fed should tighten by raising interest rates to make dollars and dollar-denominated assets more attractive.
This is contradictory advice if there is a simultaneous recession and a run on the dollar, right? And how do you think this will affect how Americans will live in the future? Not to mention health care rationing.

1 comment:

Alison said...

The value of the dollar does not directly drive a recession. It would have a remote chance of driving one. The value of the dollar drives interest rates and trade deficit. As a member of the what was once called the Buchanan Brigades, I'd go with Bob Brinker. My husband listen to him every week and consequently I do too. Brinker has proven an accurate predictor of the market.

Also, do you really think that we will see universal health care? I am getting my old picket signs out for a resurgence in a push for it. I am betting the American people will say no.