Bush’S Chernobyl Economy; Hard Times Are On The Way

Posted on Sunday, November 12 at 10:35 by Milton
Mike Swanson of the WallStreetWindow explains the worrisome details related to last month’s trade deficit: “Just a few days ago the US Treasury reported that the net capital inflows from the rest of the world into the US fell for a 6th month in a row. Private (purchases) from abroad fell to $34.7 billion in August and from $72.9 billion in July. Asian central banks made up for the shortfall. If they hadn’t the current account deficit would have exploded. The NY Times quoted Ashraf Laidi, a currency analyst at MG Financial Group as saying, “foreign central banks saved the dollar from disaster. The stability of the bond market is at the mercy of Asian purchases of US Treasuries.” Swanson poses an interesting theory, but it can’t be verified since we the Fed stopped printing the M-3 (which would provide the relevant facts about the current cash inflows) and since China and Japan have slowed their purchases of UST Bonds.

Jim Willie of GoldenJackass.com, offers an entirely different theory in his recent article “Spent Dollar Momentum”. Willie opines: “Behind the scenes are the many illicit London-based firms busily buying US Treasury Bonds with freshly-printed money from the Dept of the Treasury. Their tracks are covered by the blackout on the money supply statistic. (M-3) An isolated US government with a well-oiled printing press as the primary support device makes for a dangerous currency situation.” Willie’s “conspiracy theory” jives nicely with the US Treasury’s figures on the “Foreign Financing of US Government Debt” (June 2006) Surprisingly, between 2005 and 2006 our friends in the United Kingdom purchased an additional $142 billion of USD bringing their stockpile of dollars to $201.4?!?

Why?

Why would UK investors suddenly stock up on dollars when everyone else in the currency market is bemoaning the greenback’s systemic problems? Could it be that banks in the UK are just hiding the paper trail for friends in America who want to forestall a collapse in the dollar until after the election?

Read the whole article at the Information Clearing House. [Proofreader's note: this article was edited for spelling and typos on November 14, 2006]

Note: the Information Clearin...

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