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Dollar Going For Bust

June 6, 2007

In these times of uncertainty, the U.S. dollar is not looking that good as an investment. With the total secrecy of the Bush administration the world is nervous, and unsure of what will be their next step.

A few days ago a friend of mine gave me an article to read on the possibility of the debt setting off a dollar collapse, and what that would mean to the people of the United States. Well that got me wondering just how close we are to a full-out collapse of the economical collapse of the way of life we have come to now in the last 40 or so years. So I started to dig, and wound up in China. (Sorry I could not resist.)

Contrary to what most think China is not the holder of the most of the U.S. debt.
Wiki

The country holding by far the most U.S. debt is Japan which held $612.3 billion at the end of the first quarter of 2007. The People’s Republic of China has been increasing its holdings of US debt instruments, end the first quarter of 2007 with over $1.2 trillion in total foreign reserves, of which about $420.2 billion are U.S. Treasury securities.

So who could do the most damage to the U.S. economy, I personally feel that is the U.S. government it self. By putting the country on the line it has through this administration we have become open to being on the brink of economical disaster. One key to this is by giving substantial tax cuts to the corporations in hope of stimulating job growth, during a time of war that has cost the U.S. 1 to 2 Trillion dollars as of January 2006.

Guadian

The real cost to the US of the Iraq war is likely to be between $1 trillion and $2 trillion (£1.1 trillion), up to 10 times more than previously thought, according to a report written by a Nobel prize-winning economist and a Harvard budget expert.
The paper on the real cost of the war, written by Joseph Stiglitz, a Columbia University professor who won the Nobel prize for economics in 2001, and Linda Bilmes, a Harvard budget expert.

Mr Stiglitz told the Guardian that despite the staggering costs laid out in their paper the economists had erred on the side of caution. “Our estimates are very conservative, and it could be that the final costs will be much higher.

We have to remember that this study was completed before the troop surge by the administration. Seem I remember then Secretary of Defense Paul Wolfowitz, saying that the Iraq war would pay for itself, and the reconstruction of Iraq.

The cost of the tax cuts over the next 8 to 10 years will run neck-in neck with the cost of The Iraq War. Some where in the neighborhood of 3.5 Trillion Dollars. You add that with the cost of rebuilding New Orleans, and other disasters that have happened and not yet happen, we can see why the Dollar is as unstable as it is.

Source

Congressional Budget Office data show that the tax cuts have been the single largest contributor to the reemergence of substantial budget deficits in recent years. Legislation enacted since 2001 has added about $2.3 trillion to deficits between 2001 and 2006, with half of this deterioration in the budget due to the tax cuts (about a third was due to increases in security spending, and about a sixth to increases in domestic spending). Yet the President and some Congressional leaders decline to acknowledge the tax cuts’ role in the nation’s budget problems, falling back instead on the discredited nostrum that tax cuts “pay for themselves.”

The same as the war will pay for itself , (hum).

The dollar in recent months has been like a Red Headed Step-Child, It has been taking a beating. With the U.S. dollar falling and the Canadian dollar rising, it is predicted that the Canadian dollar will be at or grater than the dollar.

The price of a Barrel of Oil closed out yesterday at 62.21 up one dollar over Monday, 06-06-07. Now with a cyclone baring down on Iran, and the Gulf Hormuz, experts say that depending on the devastation caused, we could be looking at 80 dollars a barrel.

Ap

MUSCAT, Oman – Oman evacuated tens of thousands of people Wednesday, suspended oil exports, and closed the major port of Sohar as a weakening Cyclone Gonu roared toward the Strait of Hormuz — the world’s major transport artery for Persian Gulf oil.

Oil prices rose amid forecasts that the storm — a rarity in the region — was barreling towards Iran.

The entire area is unsafe. Vessels that were bound to call here say they are diverting because of the storm,” Nair said. “Some are still going through the strait.”
Manouchehr Takin, an analyst at the Center for Global Energy Studies in London, said the real fear is that the loading of tankers might be delayed by the storm.

“About 17-21 million barrels a day of oil are coming out of the Persian Gulf. Even if only some of the tankers are delayed, that could reduce the supply of oil and increase prices,” Takin said.
In Iran, authorities evacuated hundreds of people living in the port city of Chabahr on the coast of the Sea of Oman, believed to be next in the cyclone’s path.

So looking at all that is going on in the world and that this administration has done to cripple the dollar, if the U.S. comes out of this with out a major recession we will have really survived the “Perfect Storm”.
ABA

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One Comment leave one →
  1. justordinary permalink
    June 25, 2007 6:29 pm

    Glad to see the post on the weak dollar. It worries me. It has for some time now.

    I just wish someone would wake us up from this nightmare titled, “George W. Bush and Dick Cheney”!

    Good blog post Aba keep it up!

    Like

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