Tuesday, March 2, 2010

United States: See Your Future...

Through the colorful writing of SocGen's erudite and perceptive Albert Edwards:
Either governments pursue the path of fiscal rectitude (although it is a bit late for that) and we subside back into recession or we debauch the currency through deficits, the printing press and devaluation.
The FT Alphaville blog offers a fantastic American, de-Anglicized translation of Edward's wisdom: 
SocGen’s Albert Edwards says everyone should just relax and stop worrying about GBK because in an Ice Age a weak currency is the escape route of choice from the deflationary quicksand.
What's ironic is that the American public and policymakers seem to completely lack the understanding that, since 2002, the U.S. dollar has experienced substantial devaluation, with the dollar index plummeting from 120 to a low of 71 and a current reading of 80.66.  That's drop of 41% from high to low and 33% from high to current.  Remember, this drop is measured against a basket of global currencies, predominantly euros, yen and sterling.

Anyone want to take the position that a drop in the U.S. dollar of that magnitude is NOT debasement?  Our "future" is here and now.  Prepare yourself for serious price inflation ahead.

(click to enlarge the chart)


  1. Dave,

    We may not see the US dollar fall until one of the US states fail or get bailed out. Until that happens, or there is a major outbreak of civil unrest, inflation will be minimal.

    I do agree with you though, the tide is turning and hyperinflation lays ahead.


  2. This computer algorithm based financial world is going to blow sky high. The metaphor being a movie called, "The Terminator".

    It's also ironic that the star of that movie presides over one of the largest, busted economies on the planet.

    Joe M.

  3. thanks for you commen highcastle. check out the chart i added. we've already had substantial debasement. agree that when Obama starts to bailout the States the real shit will hit the fan for the dollar

    Joe: awesome observation