....no, not THAT "W", the last thing he wants to do is ride again.
The "W" I speak of is the shape of the economic curve on the charts as another sinking of the US financial markets is about to overcome us, and there are signs we are on the tip of the past high as a gain from the lows of November last year.
In the "W" forecast, there will be another dip, followed by some kind of recovery, but that recovery will take a long time.
Several factors come into play.
When the market crashed last year, the market's liquidity was in fairly strong dollars. The crash occurred because investors lost confidence in the banks and investment houses that their dollars would be safe, so they sold and got out of the market. Action by the Obama Administration to spend (print) huge amounts of fiat currency have weakened the world's confidence in the dollar badly. That weakened confidence SHOULD have resulted in a de-facto, if not de-jure devaluation of the dollar by now, BUT IT HAS NOT. Instead, the Treasury has adopted a strategy of propping up the dollar instead of letting it float downward to a more natural level where it would find support.
As a result, and this is also driven by day-traders of currencies, the dollar sits at a level considerably above where it should be right now. It is priming itself for a quick crash against the world's better currencies (most of them) each and every day it is not allowed to settle to a level more commensurate with the rest of the US economy, which is still in the crapper.
Day before yesterday, Dr. Nouriel Roubini said that if recovery has started, it's hardly noticeable, and yesterday, Warren Buffett, a great buddy of Obama's, said essentially the same thing.
This article paints a much more ominous scene than either Roubini ("Dr. Doom" to his friends) OR Buffett. When you read it, skim down past the first part of the article, which is basically an evaluation of one investor's advice. You get to the meat of the adviser's warning:
"Some U.S. embassies worldwide are being advised to purchase massive
amounts of local currencies; enough to last them a year. Some embassies
are being sent enormous amounts of U.S. cash to purchase currencies
from those governments, quietly. But not pound sterling. Inside the
State Dept., there is a sense of sadness and foreboding that
'something' is about to happen ... within 180 days, but could be
120-150 days."
Allow this NON-economic adviser to posit just what that feeling of sadness and foreboding is: it will be the crash of the US Dollar, a crash so bad (against other, more stable currencies) that total economic chaos will reign, and the US Dollar will then HAVE to be forcibly devalued, setting off hyper-inflation here. That feeling of sadness is the premonition that ANY AND ALL influence that the US has because of it's formerly-stable dollar will vanish overnight.
This crash will probably lead to a global crisis of the first order, as currencies which are totally dependent on ours fail as well. Consider Mexico, Venezuela. Argentina, Brazil and maybe one or two other Latin countries as goners right along with us. Most African nations are doomed, as are all the South and Southwest Asian countries. The Pound Sterling will definitely test ALL the safety nets the Brits ave built into it.
Will this just be an event we will ride out, pick ourselves up and recover from (because our ability to produce is still there), or will it hurt us badly enough to create a violent backlash against the Federal government which will have caused it?
Stay tuned, but be prepared to function in a barter economy for a while (do NOT accumulate cash, it will turn worthless as you count it the day the banks close). I think we will stagger along through this summer and into the fall before the crunch comes. There WILL be a crunch. If we are lucky, it will just make this "recession" into a simple Depression from which we can recover, IF WE ABANDON RECKLESS FISCAL POLICY. If we are unlucky, or, as I expect, the Obama Administration makes the initial crash of the dollar MUCH WORSE by printing even more fiat money, then we geezers will die of old age before the nation pulls out of this, and when it does pull out, faces many decades of re-building the world's confidence in our economy.
If the Obama Administration were smart instead of the fiscal idiots they have turned out to be, we could still head this off, by freezing new Federal spending, cutting the Government's give-away programs and balancing the budget NOW.
That's not going to happen, and as I type, the Congress debates how to put us another 10 or 20 percent of GDP into the red for just this year (ObamaCare). There are even rumors of another "Stimulus" (more fiat money printed).
They just don't get it in DeeCee, so we are going to get hammered, hard.