So How’s That Economic Recovery Going?

A lot of media spin has been about how we are recovering economically despite the lack of jobs. After all, the stock market keeps going up and it is the barometer of the economy.  At least that is what people assume, but there are many other indicators of economic health.

It isn’t often you see the words “world gold supply runs out.” In fact, I don’t recall ever seeing them until this article at The Telegraph. With less retrievable gold ore in the ground, it is going to be harder for nations to convert their financial reserves to hard metal.  Output is plunging at the mines, so the rush to invest in gold has a problem – there isn’t enough of the precious metal to go around.

That’s always been an argument I’ve had with goldbugs, that there isn’t enough of the metal to cover the currencies of the world. There is a possibility that silver will go back up to make up the slack, but money is an illusion whether it be made of metal or paper or electrons floating in computers. Faith is what sustains it and gives currency value. So what happens when you can’t convert the currently held currencies and they dwindle into nothing?  We may find out.

Speaking of running out of things, the FHA is running out of cash and may require – you guessed it, a bailout from the government. Oh yes, the housing market is still in trouble and there is fear they can’t cover loans due to growing unemployment. The critical quote of the piece:

The FHA’s cash reserves have plummeted to $3.6 billion, compared with $685 billion in outstanding insured loans - a ratio of 0.53 percent that is far below the 2 percent required by Congress and a fraction of the 6.4 percent reserve ratio in fiscal 2007.

Banks are usually closed down if they have that kind of ratio, so this is not good. With no signs of unemployment going down, we’ll be seeing more of these loans defaulting. So there will be a bailout using tax payers’ money.  Except we don’t have enough because revenues are down. But China will loan us the money, right?

Well, China is not very happy with the US right now.  They rightly have figured out that the weak dollar and low interest rates have dangerously ballooned stocks and property investments.  What we don’t need is more bubbles that will burst and that is precisely what we are getting. 

Not that China is really helping things themselves.  Ambrose Evans-Pritchard has an interesting and somewhat alarming commentary on the problems surrounding China’s exporting overcapacity.  We have too much supply and not enough demand from them so they are not taking up the slack from the West. Read it.

Fears of a double dip recession abound, but I still think we never came out of it in the first place.  It was just a plateau in the fall and we are going to see darker days before anything truly gets better.

One kind of darkness has already fallen on Australia. They went with a cap and tax scheme to lower carbon emissions and electricity prices skyrocketed. People can’t afford their bills and are being cut off with retirees being hit hardest. That will strangle their economy in no time flat. Right now they are experiencing what we will if similar legislation is enacted.

I wish I had good news to report.

Weekend Links: The Economy

It was quite a week for developments on the economic front.  I wish I could report it was good news.
First off, official unemployment hit 10.2% after October’s figures came in.  This indicates things are getting worse for the American worker – not better. Ed Morrisey at Hot Air has an excellent post on it including an updated Romer graph of what the stimulus promised to do versus what actually happened.  We are off the chart now.  Also from Ed is a post with links of what jobs were really saved by the stimulus, starting with California.  Hint: the state & federal governments aren’t honest.
Doesn’t get much more pointed than what India’s finance minister said when their central bank bought 200 tons of gold in order to reduce dollar holdings.  What did he say about the economies of Europe and the US?  That they had “collapsed.”  Asian countries are running from the US dollar now.
Makes the wrangling over how much to increase health care look silly if there won’t be any money at all.  Still, the Republican health care plan was rolled out Wednesday after having the CBO (Congressional Budget Office) go over the figures.  It would actually reduce the deficit by $68 million over a ten year span.  Sounds good compared to the trillion dollar increase in debt from ObamaCare.  Still, how will any of it be paid for? There is no answer on that, because there is no way to!

UPDATE:  I was wrong, the Democrats plan isn't a trillion dollar outlay, but $3,000,000,000,000 plus over 10 years according to the CBO! The Heritage foundation estimate comes in at $2.4 to 2.6 trillion.  This is insane.

The Dollar IS Dying

 A month ago, I posted about the U.S. dollar being in trouble.  Things have progressed in the short time since then, with a slew of new headlines culled from around the Net.

Let's start with the New York Post article Dollar Loses Reserve Status to Yen & Euro. In it, we learn that 63% of money being put into reserves by banks went to the Japanese Yen and the E.U. Euro in the last three months.  Traditionally, around 66% would be put in the dollar, but only 37% was. Over at Bloomberg, they report the same while pointing out that world leaders are following through on their threats to diversify.  Apparently, they don't approve of how U.S. economic woes are being handled by the new administration.

In another article at Bloomberg, they report that the dollar is down 10% against other currencies in the eight plus months Treasury Secretary Geithner has been in charge. In fact, they go so far as to call it the Obama Dollar. At this point, the current mess is now owned by the Obama Administration so I think the honeymoon is over. Meanwhile, the Pound Sterling is having problems as well, based on the fear that inflation is decreasing in the United Kingdom.

It looks like the shift from the Anglo currencies has finally begun, as the economies of the United States and Great Britain have lost the confidence of foreign investors.  Interestingly enough, these are the two countries that enacted the biggest stimulus packages during the current economic downturn.  I don't think this is a coincidence.

Runaway hyper inflation is around the corner, what with oil going up and consumers unable to spend more due to being tapped out on credit,with many losing jobs and giving up on full employment. I don't blame other countries bailing out on the dollar, as it is a race to get any kind of value back from what they sank into our treasury bonds before they become worthless. Talk of another stimulus will just continue the flight from the dollar and I think our political elites in both parties have failed the country and the world completely in how they've handled things.

It took a world war to bring the country out of the Great Depression.  I hope that won't be required this time.