The depreciating U.S. dollar will also make the many imported goods that U.S. citizens buy more expensive. This will mean that wages will not purchase as much. As mentioned the price of oil increasing will involve a multiplier effect that will make numerous basic goods necessary for a decent standard of living for the working class more expensive. Of course there may be some increase in consumption of U.S. produced goods and also an increase in exports but I am not sure this will be sufficient to offset the negative effects.
--- Jim Devine <[EMAIL PROTECTED]> wrote: > ken hanly wrote: > > Isn't there a problem with government attempts to > > solve the liquidity crisis and stimulate the > economy. > > Aren't they liable to cause inflation especially > when > > combined with high oil prices and agricultural > > production shortages that are driving up prices. > > Converting agricultural to biofuel production > doesn't > > help either. Couldn't we end up with RECession > and > > inFLATION? > > That's right. the Fed faces a classic dilemma > stimulate and face > greater inflation -- or fight inflation and let Wall > Street melt and > Main Street slump. The good news is that these days > the bases of a > classic price/wage spiral are weak: unions have been > flattened in the > private sector and US businesses have less > price-setting power than > they did in the Golden Age of stagflation (the > 1970s). So it's > possible that any inflation that results from the > Wall Street/Main > Street save can be reversed relatively easily. The > main thing > preventing such saves will be (I would guess) the > persistence of > financial fragility. That fragility might be solved > via bail-outs (use > of taxpayer $$) and increased regulation, but it's > hard to predict > what will happen there. > > The bad news is that unions have been flattened... > > Another problem with the save is the falling US$, > which directly > encourages inflation by making US imports more > expensive and reduces > competition for US exporters. It also reduces the > real value of the > financial wealth of folks here in the USA (or > rather, the wealth of > people who have it). Worse, US$ depreciation reduces > the income and/or > wealth of those who sell oil (and the like) > denominated in dollars > and/or who own assets valued in dollars. The > problem of oil being > priced in US$ has been exaggerated, but it's true > that the falling > purchasing power encourages companies and countries > selling oil to > hike that US$ price. So we might see a > exchange-rate/price spiral. > That can be ended by stabilizing the dollar, which > seems difficult at > this point. The US press seems to be ignoring this > issue. > > If I were smart, I would have shorted the US$ when > Bush was selected > and (in 2004) when his selection was ratified by > voters. I did shift > my 401k funds more toward non-US assets... > -- > Jim Devine / "Segui il tuo corso, e lascia dir le > genti." (Go your own > way and let people talk.) -- Karl, paraphrasing > Dante. > _______________________________________________ > pen-l mailing list > [email protected] > https://lists.csuchico.edu/mailman/listinfo/pen-l > Blog: http://kenthink7.blogspot.com/index.html Blog: http://kencan7.blogspot.com/index.html _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
