Saturday, December 13, 2003

Is This Progress?

The release of this year's trade figures exposes the dark, seamy underbelly of the recovery. We've set a new record trade deficit to go along with our record federal budget deficit. Personal debt levels are also setting records. And based on our previous conversations I think we are generally in agreement that the dollar is substantially overvalued, generally speaking. To top it off, our good friends at the Heritage Foundation point out that the federal government has generated these record deficits despite a $247 billion/year windfall of reduced interest payments on the national debt due to low interest rates. Now, I'm still not sure how much of the fiat currency doom and gloom to buy, but it is absolutely clear to me that these trends are unsustainable. Given the general tendencies of economic systems (read massive feedback loops), I suspect when they reach the limits of their sustainability they will not sort themselves out gently. Particularly given the dire circumstances of the impending baby boomer retirements. Even if the political establishment starts to recognize this problem, public inertia and the rapid onset of fiscal catastrophe will likely prevent them from having the necessary impact. It is becoming difficult for me to see a scenario where we do not suffer a major economic meltdown sometime in the next 15-20 years. Maybe buying gold is not such a bad idea...

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