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Re: HowardHughs post# 12430

Saturday, 06/13/2009 7:45:54 PM

Saturday, June 13, 2009 7:45:54 PM

Post# of 45501
I really don't think world health problems can help the $USD - The US needs dollars to fund a number of the current administrations projects.

To get those dollars we need someone to buy our bonds. If the world faces more financial problems they can't be buyers. China already has too many dollars and is signalling that it will look for ways to exchange them for material goods, including gold.

This does not bode well for the trade deficit (we need those dollars back) and forces the US to look for other buyers. Bottom line those other buyers will more than likely be taxpayers as the FED picks up the tab by buying the bonds itself.

That means cranking up the printing presses and flooding the system with dollars, which causes inflation.

The bad news for US consumers is the cost of everything will rise as the value of the dollar plummets. The good news is that debt shrinks in comparison as more dollars are available. (Just what the government doctor ordered)

As for the markets, climbing back up may not be the hat trick everyone supposes. For one thing, since there will be more dollars around (of less value) DOW 10,000 won't be as tough a nut to crack tomorrow as it was yesterday.

Those holding dollars are going to need many more of them as a result of the loss of purchasing power. Those holding gold/silver will be able to exchange it for many more dollars than they originally paid.

Granted everything will cost more, but wise 'goldbugs' will have more.




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