For any of you that dont think the dollar could ever collapse, here is a news report that tells you just how fragile our dollar is right now. <object width="560" height="340"><param name="movie" value="http://www.youtube.com/v/xxjVi8DYLuA&hl=en&fs=1"></param><param name="allowFullScreen" value="true"></param><param name="allowscriptaccess" value="always"></param><embed src="http://www.youtube.com/v/xxjVi8DYLuA&hl=en&fs=1" type="application/x-shockwave-flash" allowscriptaccess="always" allowfullscreen="true" width="560" height="340"></embed></object>
Everything is relative in a world of fiat currencies. The only way the dollar collapses is if it's the first fiat currency to go under. But, as the piece points out, China is actually shouldering most of the risk due to 70% of their reserves being in the dollar. Exiting that position will most certainly cause the dollar to fall apart. So, they have to sit pat and wait it out. What puts the U.S. in a better position are the economies of Germany, the U.K. and Japan. All are in tough shape and you can easily argue that none of them are as diversified as the U.S. economy. The fallout from any of those economies going under will force China and the world into preventing the dollar from collapsing.
What happens to stocks then? If the dollar falls apart. Dont stocks own capital assets and pricing power. Would stocks be a better place if this happens?
In times of moderate to relatively strong inflation (as witnessed in 2000-2008) stocks perform relatively poor especially in real terms. The Dow was at 11000 in 2000, it hit 14000 in 2008 but during that time the dollar in which the dow is trading collapsed against other currencies such as the euro, the Swiss Frank and commodities such as gold or oil. Stocks did gain in nominal terms ofcourse but clearly no where near enough to gain real positive purchasing power. In a true collapse of the dollar or a hyperinflationary enviroment ofcourse the stockmarket would be a better place to locate your capital then cash but even then it's performance is not guaranteed VS foreign currencies or commodities. Cheers.
I'm reading "The End of Work". It's a most interesting book. The author argues that productivity gains are benefiting the corporations and not workers, and not just in the USA, it's global. He says it's a myth that productivity gains through technology create other, better jobs for the displaced workers. That explains very well our "jobless recoveries". Couple that with the threat of serious inflation and the truth may be a lot worse than anybody realizes regarding fragility. With jobless recovery the tax base shrinks [the State of California leadership is seemingly about to figure this out.. maybe.. ] while the bailout money flows from the public coffers... Martin Armstrong's prediction of hyperinflation after a credit crisis might be borne out.. Trade well or die folks, it's end game for the workers of the world unless they form a global union and ensure that wages keep up. I don't see that happening at all either...
Maxpi.... I'm reading "The End of Work". It's a most interesting book. The author argues that productivity gains are benefiting the corporations and not workers, and not just in the USA, it's global. He says it's a myth that productivity gains through technology create other, better jobs for the displaced workers. That explains very well our "jobless recoveries". Couple that with the threat of serious inflation and the truth may be a lot worse than anybody realizes regarding fragility. With jobless recovery the tax base shrinks [the State of California leadership is seemingly about to figure this out.. maybe.. ] while the bailout money flows from the public coffers... Martin Armstrong's prediction of hyperinflation after a credit crisis might be borne out.. Trade well or die folks, it's end game for the workers of the world unless they form a global union and ensure that wages keep up. I don't see that happening at all either... ................................................................................................ Agree with the view....and would like to restate a possible solution .... Think out of the box as to how stock ownership could solve labor versus efficiency issues.... Labor would want efficiency because the value of owning stock would be hopefully more than offsetting.... Thus the solution to better distribution of wealth.... A factory cannot exist without good people whether the products are soft or hard assets.... Better distribution of wealth through merit is of paramount importance for many reasons....