Back to some basics Collapse? Indiana Pension lawsuit...Laughing at Geithner Deese the Savior Nader resurfaces The Rev Returns Sea Kittens Quote of the Week
Weaker dollar, higher priced gas
Oil is traded in dollars, so as the dollar weakens, oil producing countries (like our friends the Saudis) raise the price of oil to maintain their profit. The exchange rate of the dollar to the euro is important to understand how the money changes hands.
If the dollar devalues by 25% to the euro, but revenue to the Saudis is tied to the dollar, which translates to 25% less money coming into the Saudis to use in Europe.
The dollar is worth 3.75 Saudi riyals, so when a barrel of oil is $100, that translates to $375 Saudi riyals. When the dollar declines 25% against the euro, the riyal declines the same amount, so the Saudis raise the price of that barrel to buy goods and services in euros.
I used the Saudis as an example, but the math is the same for all oil exporting countries.
Why the weaker dollar?
First is the debt, projected to grow to at least $12 trillion, so some foreign investors fear the US is letting the dollar devalue to lessen the debt.
Next, to pay on the debt the US will have to raise taxes, which slows economic growth.
As the dollar declines less assets will be held in dollars waiting for the decline to stop. Therefore, there will also be activity to diversify your "portfolio" in assets that are not held in dollars.
Fear of collapse?
The fear is simple: our GDP (Gross Domestic Product) is the largest for a single country in the world at $14 trillion -- expanding debt spells disaster. The European Union won't let a country exceed 3% of its GDP and the US has been over that for years.
Since 2005 the US deficit was around 8%, improving each year to 2007's 4% before the disastrous TARP bank bailout and the new President's spending since then.
End Result
It's no longer a matter of "if", it's a matter of "when" and "how" will our deficit unwind. The economy could crash and burn or decline over a long painful decade (e.g. Japan).
Either way, the effects on our lifestyle will be the same.
The US is rapidly approaching the points of no return and investors pull away from the dollar faster and faster. The vicious circle has begun and this is what we will see:
Decline in dollar means the world will dump treasury notes (and other assets in dollars) which will decrease demand and a decreased demand further weakens the dollar and the cycle continues.
This will leave the US little to no means to buy imports and since the US has outsourced manufacturing, well, let's just say that planning for the future would be prudent.
Indiana pension lawsuit
Pension funds, the various groups that invested in Chrysler, were supposed to be first in line for compensation if the company faltered. The government's control of the Chysler bankruptcy attempts to circumvent these rules and could undermine this type of investment in any company. Translated: a secured bond investment is no longer secure if the government says so.
http://www.examiner.com/x-7812-DC-SCOTUS-Examiner~y2009m6d8-Illegal-Chrysler-takeover-Pension-funds
This piece breaks this all down better than what I can articulate. What I urge everyone to understand is the basics of the government intrusion and the government changing the rules.
If you don't want to believe me, read about how the Chinese laugh at our Secretary of the Treasury.
http://www.washingtonpost.com/wp-dyn/content/article/2009/06/04/AR2009060403910.html
From Geithner, "...in the United States, we are putting in place the foundations for restoring fiscal sustainability." The Chinese students in the audience laughed at the assertions by Geithner that the Chinese assets are safe.
If anyone can read that Washington Post article and explain to me how the economy is safe, sound and recovering, Please refer me to a list of all of those companies making a profit, driving the stock market back toward 9,000.
Brian Deese, the government's liason is reshaping the auto industry supporting Fiat's takeover of Chrysler (as opposed to liquidation) and the unpopular bailout of GM. Deese has no business education, no business experience and joined the Clinton campaign before jumping into the Obama ship as it neared the finish line.
At 31, with no economic or law experience, I just don't understand how Deese is the person to salvage the American auto makers.
http://www.nytimes.com/2009/06/01/business/01deese.html
Ralph, where have you been? His piece in the Wall Street Journal dive into the government takeover of GM, outsourcing and the massive closings.
Maybe Nader speaking out will bring some supporters to see the danger in the government's interventions in the auto industry. A normal bankruptcy would have broken the company up, sold off pieces (hopefully not to the Chinese), allowed other viable companies(not FIAT) to acquire cheap new assets, nullified the union contract (not make them owners) and most importantly, the government would NOT be a stake holder.
http://online.wsj.com/article/SB124355327992064463.html
In an interview with the Daily Press, Rev. Jeremiah Wright returned to the headlines claiming:
"Them Jews aren't going to let him talk to me. I told my baby daughter, that he'll talk to me in five years when he's a lame duck, or in eight years when he's out of office."
Later in the interview:
He's my son. I'm proud of him. I've got five biological kids. They all make mistakes and bad choices. I haven't stopped loving any of them. He made mistakes. He made bad choices. I've got kids who listen to their friends. He listened to those around him. I did not disown him."
Well, I guess the Rev. clarified his opinions on "Them" Jews and the President's denouncing Wright is NOT based his anti-American and hate speak, it's just political. I'm sure we'll have to hear excuses about "guilt by association", but the President's spiritual advisor has opinions that I wouldn't endure.
Here's the message board link to the whole story, but PETA is positioning to acquire access to various lighthouses in major fishing areas to develop "Fish Empathy Programs" and use the phrase "Sea Kittens" to garner sympathy for our vertebrate friends.
http://crazedfanboy.com/forum/viewtopic.php?t=4583
In framing a government which is to be administered by men over men, the great difficulty lies in this: you must first enable the government to control the governed; and in the next place oblige it to control itself. -- James Madison
"State of the Nation" is ©2009 by Brandon Jones. All graphics this page, except where otherwise noted, are creations of Nolan B. Canova. All contents of Nolan's Pop Culture Review are ©2009 by Nolan B. Canova.