Re: Hier mal eine Stimme dazu

verfasst von R.Deutsch, 04.09.2005, 11:04

-->The State of Play - The Idle Thoughts of an Idle Fellow


The disaster unfolding In New Orleans and other areas of the Gulf coast is almost beyond belief. It is a litany of human tragedy, political ineptitude, shortsightedness, bad planning, lawlessness, greed, and plain stupidity. It is also a stark illustration of the wickedness that lurks just beneath the surface of the thin veneer of civilisation. As we watch this drama unfold, we can only try to imagine what motivates some people to shoot at helicopters that are attempting to rescue them.

America has been caught with its pants well and truly around its ankles on this one. The levees that were designed to repel a category 3 hurricane were clearly inadequate, and some media reports say that George Bush himself was instrumental in diverting funds away from flood mitigation work to pay for the war in Iraq. That would just compound the fact that New Orleans was a catastrophe just waiting to happen, but one which everyone chose to ignore. And that 'everyone' must include those citizens who ignored the directions to leave and are now suffering such appalling privations. The military and police response has clearly been inadequate, the blame for which should stretch from the Louisiana governor all the way to the White House.

Bush talks of rebuilding New Orleans, but from what I've seen and read, that may simply not be viable. The city has been sinking for decades - why would you rebuild a city that is likely to suffer a similar or worse fate a few years down the track? Apart from that, the costs involved beggar belief. CNN says it may be close to $100 billion, and that's money America doesn't have. It will have to go cap in hand to the rest of the world yet again, and although foreigners are already opening their hearts and wallets to assist in immediate relief, there must be unease amongst lenders who are already awash with dollars. When the water is finally drained away and the real damage bill can be assessed, it may well be a better idea to abandon the city for good. And don't forget that the hurricane season is still in full swing, and that the National Weather Centre, predicts another 3 or 4 severe hurricanes for the Gulf region in the next few months.

Of course the simpleton economists are already saying what a boost to GDP this will be, which is so much horse manure. Rebuilding, if it happens, will draw precious resources away from what could be new development and industry, in order to pay for the repair of something the country already had. Sure, there will be a short term boost to employment and the building industry, but that will be paid for by every citizen in the form of higher taxes, higher insurance premiums, lower stock prices and dividends from insurance companies, and because of the increase in the current account deficit, ultimately higher interest rates. If all there is to national wealth is rebuilding destroyed cities, we could demolish cities and rebuild them in perpetuity. This 'GDP boost' nonsense in akin to saying that wars boost the economy. Protracted wars drain nations dry, not make them rich - just ask the British after WW2 and the French and Germans after WW1.

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The US economic data over the past two weeks has been less than stellar. The manafacturing sector is contracting and still shedding jobs like a cat sheds hair in springtime. Retail sales are soft, and there may be the first signs that the housing bubble has sprung a leak - homes are taking longer to sell and building approvals are down. Oil and petrol prices are now really starting to hurt the consumer, and sales of gas-guzzling SUV's and V8's are diving. Prices paid by business are rising, but because of excess capacity and the continuing flood of cheap imports, those same businesses have no pricing power. This is what I wrote about last year - cost push inflation plus finished goods deflation = profit squeeze!

So, the economy is clearly in decline and because of the ever rising CRB index, inflation is a real threat. Back to the '70's is the theme, and like his predecessor, Paul Volcker, Easy Al Greenspan is caught between the proverbial rock and that other hard surface. If he goes on raising rates, he will surely tip America into a deep recession. If he stops raising, or even cuts, inflation will likely take hold, the dollar will tank, more credit will be created, more money printed, and gold will finally fulfill its promise of being the ultimate store of value. So what will he do, and more to the point what will his successor do? The political pressure on him to cut rates or hold them steady will be enormous as jobs start to disappear and profits fall. Al has never resisted the will of his political masters before and he won't this time. And a falling dollar and rampant inflation is just what's needed for a massively indebted nation - just keep printing those greenbacks and watch your debts float away. The only losers will be the Chinese and Japanese who lent them all that dough in the first place and who cares what happens to them? When massive debt gets out of hand, either the borrower gets stiffed or the lender does, and Easy Al and 'Helicopter Money' man Bernanke, who's likely to take over the chairmanship of the Fed will make sure it's the lender.

Events are now conspiring to cause real pain in the US, Katrina just happened to one of those events that arrived to further burden an already overstretched economy. Oil production through the Gulf is compromised as are exports, both of which will further blow out the current account deficit. The bear market rally in the dollar is over, and the economic and political pressure to exit the Iraq mess is growing. This week may prove to be the tipping point that starts America down the slippery slope to economic Armageddon. Only time will tell.

The Idle Fellow
malcolm4@aapt.net.au

Thread gesperrt

 

gesamter Thread:

• Die Stunde des Fiat Money - R.Deutsch, 04.09.2005, 10:52
  • Dringende Frage - Bart, 04.09.2005, 10:57
    • Re: Hier mal eine Stimme dazu - R.Deutsch, 04.09.2005, 11:04
      • Trifft die Situation recht gut - politico, 04.09.2005, 11:59
      • Re: Hier mal eine Stimme dazu - das oder ähnliches lese ich jetzt seit 20 Jahren - CRASH_GURU, 05.09.2005, 16:04
    • Re: @Bart - Dringende Frage - T. Mai, 05.09.2005, 11:24
  • @ R.Deutsch - ocjm, 04.09.2005, 11:04
  • Die Stunde des Fiat Money? Da macht sich Fritze Flink aber so seine Gedanken... - prinz_eisenherz, 04.09.2005, 17:55