About 2 months ago we had a couple threads going on the defict, economy, etc.

 

Some point were (attempted to be made) about how the deficit is leading to an excess supply of $US, that foreign governments were growing tired of the $US, and that the value of the dollar would drop.

 

Well, it's happening.

 

Back when the aforementioned threads were active, oil was at $US 66, the Euro/$US was 1.17, and gold was at $540 (actually, it fell to $538 during that time - I had another buy order executed). If you work the math (66 / the 1.17 Euro/$US exchange rate), the price of oil, in Euros, was about $56.41.

 

This morning, oil is at about $US 73 - up about 10.6%. The Euro/$US exchange rate is about 1.29. Oil in Euros is only 56.59 - up less than 1/3 of 1% - virtually unchanged.

 

Gold started its upward movement right after the Fed announced on Nov 10 that it would discontinue disclosing the M3 money supply (which includes $US held by foreign central banks) on March 23. On March 23, gold took off again as more an more foreign central banks dropped their holdings of the $US. It took gold nearly 3 years to move from $US 400 to $US 500. It took 5 months to move from $US 500 to $US 600. It took 3 weeks to move from $US 600 to $US 700 - and a week to be pushing up to $US 730 (spot gold actually went above that this briefly morning) - and in the last week the talking heads on Squawk Box, Bloomberg, etc. finally noticed.

 

New jobs were way down (about 65,000 less than expected), newly unemployed is extremely high. Retail sales are down from excpectations, inventories up (inventories follow sales - look for factories to cut back).

 

So, in short, at least as far as oil (and virtually all other imports), the inflation is due almost solely to the decline of the $US, not the US homeland economy. With the decline in the $US, it is easier for us to export, but, thanks to Clinton's role (who, along with Greenspan and Bush created this perfect economic storm), we don't manufacture much of anything to export. In about 15 minutes, we get the latest foreign trade numbers. The experts predict a deficit of $67 billion. Personally, I fear that it will set a new record at $69.5 billion - this would a wonderful time to be wrong. We are entering economic territory that has never even been theorized.

Whew - it is good to be wrong. The trade deficit for March was "only" 62 billion (details not release yet, but my guess is that the $US may have fallen enough to where we were finally able to export enough wheat to get back to a surplus in food). That should help the slow the fall of the $US. It will likely continue to fall, but it was going down way too fast. Bush's deficits, along with Greenspans artificial boost, are going to still continue a dramatic fall of the $US, and we are still facing inflation that is not due to an overheated economy but rather due to an overabundance of $US, but hopefully it will slow down a bit.

 

We have to get fiscally responsible, cut the deficit by cutting spending. Unfortunately, I don't think anyone in DC wants to cut spending.

cutting spending is a four letter word for the Bush administration.

Cut spending and stop giving so many tax cuts.