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Back in 2004, when I moved to Costa Rica, I began using the local currency, the 'Colon.' Over the years, I became accustomed to the inflation here and the corresponding fall in the value of the Colon versus the US Dollar. The Costa Rican central bank had been regulating the value of the colon versus the dollar for the past 20 years, until December of 2006, when the central bank loosened the link between the dollar and the colon. And surprisingly enough, the colon's normal fall versus the dollar began to abate. Just last week, the central bank reset it's target exchange rates. In effect, the mighty US dollar lost 4% of it's value versus the colon. Inflation here is a fact of life. The government of this (relatively affluent) third world country can't bring itself to tax it's population (especially the rich part) enough to meet expenditures, so it  simply prints money. Sound familiar?

So a retired old fart like myself gets a 4% jump in his cost of living in ONE DAY. And many of the local ex-pats are scratching their collective heads. But they shouldn't be surprised. The borrow-and-spend policies of the Republicans are significantly to blame. The Federal Reserve Boards 'easy money' policies are partly to blame. Check http://www.economyincrisis.org/ for a better summary than I can put here.

So what's my point? Who cares about the Costa Rican colon? Look at it as yet another canary dropping dead in another coal mine. The writing is on the wall. The US dollar can go nowhere but down, long term. The United States can't even benefit from the 'advantage' of a lower dollar, to whit, making US produced goods more attractive (cheap) to foreign customers. The US doesn't make much anymore. If a recession is not inevitable, I have yet to see anybody explain how.

Check http://www.rgemonitor.com/... for further details of the coming economic meltdown.

The Republicans have been running on the tax cut theme since before Reagan. And they have gotten away with the hoax, to a great extent. I have waited in vain for Democrats to call 'bullshit' on them. If your savings and wages are falling like a lead baloon due to borrow and spend policies, is the American public too stupid to understand that tiny tax rebates haven't remotely offset what they've lost due to the falling dollar and it's impact on everyone in the country?

It will be to the Democrat's advantage that the economic meltdown will probably happen before the 2008 elections. It has already started, and should be in full swing by next November. Sadly, I don't see the front-running candidates as willing to tackle this issue. It seems like a natural to me. The falling dollar = lower standard of living for everyone, even Paris Hilton (not that she'd know it, of course). The falling dollar is the fault of the Republicans. Is that simple enough?

Originally posted to aClem on Sun Nov 25, 2007 at 12:38 PM PST.

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Comment Preferences

  •  No kidding! (10+ / 0-)

    Where are the Democratic candidates on this issue?  It's already past time for them to speak out about the coming economic meltdown.  

    http://www.nytimes.com/...

    I hope that link works.  If not, check out the lead article in "The Week in Review" about Recession.

  •  So, are you saying, in part, (2+ / 0-)
    Recommended by:
    Sandy on Signal, willb48

    now's not a bad time to buy colons and/or move to CR?

    Interesting diary. Thanks.

    Mama, could we buy stuff made in China if we moved there? -- My six year-old son.

    by leolabeth on Sun Nov 25, 2007 at 01:13:53 PM PST

  •  Falling dollar is not getting the attention (7+ / 0-)

    it should.  The news I am hearing spins it in an odd way, as if the only ones affected are those traveling abroad.  The cost of purchasing imports is rarely mentioned.  Most of our goods are imports and this will impact all of us.  

    The Republicans are ruining our economy with their high deficit spending.  Their reckless policies will impact us for years to come.  

  •  Noone is paying attention (3+ / 0-)
    Recommended by:
    Sandy on Signal, pkbarbiedoll, Cliss

    The USD is falling against all major currencies.  This includes the Canadian dollar, Euro, British Pound, and even the Austalian and New Zealand currencies.

    But noone seems to have paid any attention until the last couple of months.

    First, expenditures must come down.

    And second, the Chinese govennment must be forced to float their currency (Yaun). It is coming down but is still pegged to the dollar at an articfial rate.

    US companies, who are buying all kinds of junk ( including lead toys) don't want the re-evaulation as it would drive the cost of goods up.

    Polictical will, and the removal of Secretary Paulson, is all that is needed.

    "The only person sure of himself is the man who wishes to leave things as they are, and he dreams of an impossibility" -George M. Wrong.

    by statsone on Sun Nov 25, 2007 at 01:27:45 PM PST

  •  Joseph Stiglitz: grim outlook for Bush economy (9+ / 0-)

    Stiglitz warns about the Bush years’ economy legacy

    Stiglitz also underlines that inequality is now widening in America, and at a rate not seen in three-quarters of a century. "A young male in his 30s today has an income, adjusted for inflation, that is 12% less than what his father was making 30 years ago. Some 5.3 million more Americans are living in poverty now than were living in poverty when Bush became president. America’s class structure may not have arrived there yet, but it’s heading in the direction of Brazil’s and Mexico’s".

    Separate is -not- Equal

    by pkbarbiedoll on Sun Nov 25, 2007 at 01:30:26 PM PST

  •  If you happen to be an American working in (6+ / 0-)

    Europe for an American firm and receiving an American salary you're in deep shit. (I'm speaking from personal experience).
    When the Euro was introduced in 2001 1US$ was worth 1.20 Euro, now 1US$ = 0.67 Euro.
    One's wage in Europe has last half it's purchasing power...

    we're shocked by a naked nipple, but not by naked aggression

    by Lepanto on Sun Nov 25, 2007 at 01:30:37 PM PST

  •  Sky is falling? (0+ / 0-)

    Yes I've come to the conclusion that you're right.  If you read economic reports and statements coming out in the past few weeks, they're all sayiing the same thing: we're done.  Toast.  Don't look to the government because there's nothing they can do.  The problem is too big.  

    Titanic sinking, stateroom by stateroom.
    It's a scary thing to be watching something this big unraveling before your eyes.  Slowly the screws are coming undone, and there's nothing you can do about it.  In my opinion the banks are completely broke.  In particular Citibank and Morgan Stanley they seem to be the most underwater right now.  They are hiding massive losses, which are more than their equity right now = broke.
    They are hoping desperately that the public won't find out because when they do it could very easily trigger some sort of panic like a run on the bank.  Like Northern Rock back in September.  

    I think the best thing we can do right now is get our affairs in order. Cut expenses to the bone.  Get out of debt, quick.  Cancel that vacation to Monaco.  Have a hoard of cash at home.  I'm concerned about banks because if there is some sort of crash, we can't count on the ATM's or the banks if we need to get some money.
    I would suggest a few hundred bucks, in small denominations plus coins.  

    It's coming baby.

  •  They Ran Everything-- (8+ / 0-)

    Image Hosted by ImageShack.us

    It's too confrontational for Democrats, but radicals might sneak the sentiment onto a bumper here and there.

    We are called to speak for the weak, for the voiceless, for victims of our nation and for those it calls enemy.... --ML King "Beyond Vietnam"

    by Gooserock on Sun Nov 25, 2007 at 01:43:51 PM PST

  •  The only benefactors of the meltdown... (3+ / 0-)
    Recommended by:
    farleftcoast, Sagebrush Bob, Cliss

    ... of the US economy are the international corporations as they can trade in what ever currency benefits them most.  They have no national allegiance to the US or any nation.  And, as such, are not compelled to operate in the interest of any country or its people – to do so would effect their profit margin.  Profits made in any country are diverted to tax shelters, and are not fed back into the economies from which they earned their profit.  

    The only shame in ignorance is taking pride in it.

    by carver on Sun Nov 25, 2007 at 02:07:32 PM PST

  •  My brother moved back here from Rio (1+ / 0-)
    Recommended by:
    Cliss

    a year ago and lives in my basement.  He was making up the difference for the falling dollar on his credit cards living there.  Now he has to pay the piper.  You ex-pats are going to have to put your heads together and figure out how to manage.  People here are losing their homes and moving into trailer parks.

    Winning without Delay.

    by ljm on Sun Nov 25, 2007 at 02:17:49 PM PST

    •  how to manage (5+ / 0-)

      Oh, I have figured out how to manage. I was born without the consumer gene, for which I am ever grateful. I have no car and my apartment has neither a heater nor an air conditioner. My money is in hard currency money funds. Social Security (when I am eligible) may not amount to much in real terms, but I'm not depending on that to any great degree.

      I pity those with McMansions 75 miles away from the nearest place to work. They were foolish, yes, but I have compassion for all, even the foolish.  

  •  I was painting this weekend (1+ / 0-)
    Recommended by:
    Cliss

    and found a foreign bill that had fallen behind the dresser.  

    Fimm hundrud krónur doesn't sound like much now....but maybe I can fund my retirement with it someday ;)

  •  Safest way to buy the Hong Kong dollar? (1+ / 0-)
    Recommended by:
    Cliss

    I am a US citizen and live in the USA. I'm convinced that the Hong Kong dollar is very undervalued against the US dollar. I want to put a substantial part of my portfolio into the Hong Kong dollar as an UNLEVERAGED LONG position. What is the best way to do this? All of the possibilities I know of either have too much risk, have lowball yields, or can't be implemented:

    1. Buying the Hong Kong version of US Treasury Bills: Does Hong Kong have something similar to Treasury Direct? I'd get the maximum possible yield consistent with NO RISK (other than the risk of the Hong Kong dollar losing value). However, I have NO IDEA how to get into something like this.
    1. Buying the Hong Kong version of Vanguard's Treasury Money Market Fund: This would be more convenient than the previous option and only yield slightly less. However, I don't know if this option actually exists either.
    1. Buying a Hong Kong dollar ETF: I already have the Currencyshares ETF that invests in Japanese yen. However, I haven't been able to find ANY ETF that invests in Hong Kong currency.
    1. Buying Hong Kong dollars through FOREX broker Oanda: Oanda is the best capitalized FOREX broker, has a great reputation, and allows small trades. However, Oanda puts customers' money in banks. I never trusted banks. So many failed during the S&L crisis of 1990, and many more will fail in the next few years because of subprime/alt-A/other shaky mortgages. For Oanda's full statement, go to http://fxtrade.oanda.com/... (click on reason #4).
    1. Buying Hong Kong dollars through FOREX broker Interactive Brokers: Many people recommend this firm, but it has a $10/month inactive account fee that would eat into my return.
    1. Buying Hong Kong dollars through other FOREX brokers: Unfortunately, other FOREX brokers are less capitalized than Oanda and/or don't allow small trades.
    1. Buying Hong Kong dollars in paper bills and stuff them under the mattress: The problems with this include high fees, the lack of interest payments, and the risk of fire/theft/other loss.

    What should I do?

  •  test market (1+ / 0-)
    Recommended by:
    Cliss

    you mean neocons didnt invent borrow and spend,
    or was costa rico their test market?

  •  The end is near (2+ / 0-)
    Recommended by:
    farleftcoast, Cliss

    OPen a swill bank account and switch your remaining funds into Swiss francs. The dollar is tanking, and the next step will be a full-blown currency crisis. You don't want to be in dollars when that happens. Could get ugly.

    Live unity, celebrate diversity.

    by tjfxh on Sun Nov 25, 2007 at 04:05:41 PM PST

  •  The worst thing (3+ / 0-)
    Recommended by:
    farleftcoast, Cliss, truthbeauty

    is that a few people saw this coming. One analyst decided five years ago that no good would come of these creative investment vehicles.

    When they stopped publishing the M3 early last year, I thought it was a bad sign and got rather obsessive/compulsive about financial news and monetary policy. A fair few commentators even in 2006 were predicting a meltdown -- all Cassandras, no one took notice. USG, largest supplier of drywall products already had an 1,100 worker layoff that year.

    Many were the dots that could have been connected.

    I fault the financial press for hype of the good news and ignoring the bad. Even now, 'subprime' is still a feature (or is that a bug?) of the majority of news items. The real truth is that we went past subprime problems months ago. When the rot had already spread to Alt-A and prime and jumbo mortgages, all we got was May 21, "The subprime problem is largely contained." Bah!

    An article today claimed 100,000 jobs had been lost in the mortgage services area. Construction layoffs are climbing. Yet the government assures us unemployment is low? Not to put too fine a point on it, they lie. Same with CCPI.

    Ben and Hank are propping up the banks and there's no trickle-down to mortgagees.

    The worst factor is, so much of thix toxic paper is in some many places. People are going to discover their pension funds may either be diminished or toast.

    And it's going to get worse before it gets worser.

    What is past, is prologue

    by US2oz on Sun Nov 25, 2007 at 04:22:21 PM PST

  •  Advisors (0+ / 0-)

    I heard from my advisors, markets will get some
    bounce during Dec, all hell should break loose
    with the larger down cycles beginning in Jan
    through end of Feb. At least the larger 120 day
    cycle is down into Feb, possible 4 years down
    cycle kicking in then. 4 year down cycles are
    typically 38% major declines. That may come next
    spring. Our recent decline was only a 45 day cycle,
    jan-feb is a 120 day larger down and possibly a
    38% down 4 years cycle coming in the spring.

    Strap in.

    The epicenter of the mortgage defaults comes in
    during Feb.

    Fed may have a small 1/4 pt cut this week,
    put to call ratios indicate a big payday for
    the boys by running the market up one time in
    Dec to blow out the new panic put buyers.

    They will paint it to keep sentiment favorable
    for the commercial season.

    All hell breaks loose on or after Christmas.

    This is the last change to exit the markets.

    Dollar low in the low 70's is near. It will recover
    one time toward the 78 area before the epicenter
    of the collapse takes hold toward 40 over the next
    several years.

    It took 6 years for bush to crash the dollar from
    120 to 75, it will take several years from 78 to 40.

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