Thursday, October 18, 2007

The U.S. Dollar falls to a record low…

This will be a short rant, as my usual readers know how I feel about the prospects for the U.S. Dollar.

Oil is at a record, gold is at 27 year highs, silver is nearing a record – all as priced against the U.S. $. If you were a Canadian citizen, earning and saving Canadian Dollars you might not know what all the fuss is about because the Canadian Dollar has maintained much its value versus these commodities.

The first baby-boomer just took early-retirement, in a few years the waves of boomers hitting the medicare rocks will come crashing in. The only way to fund this stuff in the future is for the U.S. to monetize its debt (a nice way of saying print enough money to purchase all of the outstanding debt obligations).

You would be better off saving toilet paper instead of dollars. At least TP can be used as a barter item.

The U.S. Dollars decline is not a mere coincidence with the rise in oil prices. Forgetting for the moment that oil is priced in dollars, the U.S. borrows over $1.2 every business day to fund its oil purchases, and if you look up 2 paragraphs you will see that the U.S. has no intention on making good on those debts. It then follows that cash is trash (bonds too) and oil is still very, very, very cheap.

BTW, since the Fed appears to have abandoned the U.S. $ in favor of housing, it follows that hyperinflation is likely in our near future. That means the stock market should head significantly higher (over the medium to long term, no opinion about tomorrow, next week or next month…) in NOMINAL DOLLARS - We will all be rich, sort of. Unfortunately, milk will be $15 per gallon, bread $8 per loaf, and a dozen eggs $12, and a pair of those Chinese made athletic shoes will be $300.

Yours for a better world…

Mentatt (at) yahoo (d0t) com

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