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May 21, 2006

The Devil's Alternative

"Inside weeks or (at most) a few months, Mr Bernanke of the US Fed will be faced with the devil's alternative. He can keep on raising US interest rates and drive the US economy into a downturn while defending the international value of the US Dollar. Or he can choose to stand pat at the next FOMC meeting (or the one after that) to support the US economy. If he does, he will see the US Dollar REALLY dive in international value." More

To the average person, the economy is rolling along like it always has. Yes gasoline has gone up a lot, food prices and other prices a little, but this is nothing new. The stock market has gone nowhere in six years, but it is not cause for alarm. Interest rates are low which seems good. There seems to be no reason to be concerned by the monetary signals reported in the media. Contrary to what is reported in the news, Mr. Buckler presents an alarming picture of the weak underpinnings of our world economy. As big as these numbers are, there is no way to know where and when the breakpoint is. Economies have a pattern of deteriorating slowly below the surface until one day, BOING, something pops.

We're not facing a traditional recession like the kind we have since WWII. This one has been accumulating pressures since WWII; the others were babies. For the foreseable future, your wages are going to buy less and less. If you count on your credit cards or your mortage equity to keep afloat, you are digging a hole for yourself you cannot get out of.

Posted by Ray Hewitt at May 21, 2006 10:17 AM

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