World Economy

Started by Michael London on Sunday, December 5, 2010
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12/5/2010 at 7:31 PM

When will this settle down? We see extreme volatility in markets.

IMO, not for a long while. The US-Dollar is presently the biggest "bubble" around. When THAT bubble bursts (sometime within a year, I suspect), the present mess will look like peanuts.

12/6/2010 at 4:15 AM

We see this in South Africa with a currency that continues to strengthen against the USD, rising gold and oil prices. Hot or speculative money enters the country to buy resources as a hedge against inflation with increasing commodity prices When food prices start to increase the problems will start to boil.

The authorities are worried as the "recovery" appears to be jobless.

12/6/2010 at 4:20 AM

@ Shmuel, Your hypothesis is supported in this week's New York Times - Dec 4, 2010 [ Fears of a Crisis].

while that article is very interesting, it in a also rather typical of the American mindset: It pretends that the USA is a self-supporting "island". This ignores the issue I mentioned completely.

If a number of states or cities start defaulting on their loans,
1) what will this do to the dollar in the international market - it will start falling even faster.
2) With the dollar much devaluated, WHO would be crazy enough to lend the USA even MORE money, and against what sureties??
3) The USA depends on imports for MANY crucial needs. With the dollar in the crapper, how will the USA deal with it's extreme trade deficit? You can't buy much more than you sell, if your currency is tanked...

12/6/2010 at 11:29 AM

Shmuel, Do you think perhaps the NYT's realizes the true extent of the Crisis, but only hints at it to avoid aiding a premature bubble collapse?

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