I doubt if anyone reads this blog. I started it a couple of years ago because of my worries about the economy. Today, despite the continued problems, I am feeling much more positive. Here is why:
1. Europe will default (see previous post). The dollar will be seen as a safe-haven and will be strengthened as a result. Dollar 1, Euro 0. There are no other serious competitors, although the Australian or Canadian dollars might be a good investment.
1. Europe will default (see previous post). The dollar will be seen as a safe-haven and will be strengthened as a result. Dollar 1, Euro 0. There are no other serious competitors, although the Australian or Canadian dollars might be a good investment.
2. There is some truth to my "alchemy" theory (see previous post). Part of this has to do with being monetarily sovereign. But most of it has to do with the unique position of the US in the world. Call it American exceptionalism or being the world's policeman or being trusted by China, but the US dollar's position as the reserve currency is still unique in the world.
3. As long as the dollar is still the reserve currency, the US can handle deficits that will increase the debt by 7% per year. I use this figure because it will take 10 years to double the debt at this rate. $14.3 trillion x 7% = $1 trillion. If the US can reduce its deficit to $1 trillion/year, then it should be sustainable indefinitely. The deficits for FY2011 and FY2012 will exceed this amount, but maybe these can be excused because of the deflationary tendencies they are offsetting. As of FY2013, the deficit is projected to be under the $1 trillion amount. And the Tea Partiers will make sure that the deficit comes under control.
So no worries. I am going to keep this blog alive to comment on some events, but as soon as the deficit drops below the "magic" 7% number, I will close it.
3. As long as the dollar is still the reserve currency, the US can handle deficits that will increase the debt by 7% per year. I use this figure because it will take 10 years to double the debt at this rate. $14.3 trillion x 7% = $1 trillion. If the US can reduce its deficit to $1 trillion/year, then it should be sustainable indefinitely. The deficits for FY2011 and FY2012 will exceed this amount, but maybe these can be excused because of the deflationary tendencies they are offsetting. As of FY2013, the deficit is projected to be under the $1 trillion amount. And the Tea Partiers will make sure that the deficit comes under control.
So no worries. I am going to keep this blog alive to comment on some events, but as soon as the deficit drops below the "magic" 7% number, I will close it.
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