Tuesday, January 25, 2005

ECONOMIC DOOM - DOUBLE DIGIT INTEREST RATES?

ECONOMIC DOOM


http://www.forbes.com/2005/01/10/cx_da_0110doomdollar_print.html

According to Forbes magazine, a growing number of economists see big economic problems ahead, due to:

ever-growing US federal budget deficits,

a record US current-account deficit,

increased consumer debt,

a bubble property market ready to burst,

a surge in personal bankruptcies,

the prospect of inflation,

interest rates on the rise,

a falling dollar that is likely to fall much further,

the U.S. producing too little, saving too little and spending too much

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Peter Schiff, chief executive of Euro Pacific Capital says:

"Our creditors are going to stop. They are going to bite the bullet," which means realizing we can't repay them in the way they want and expect. They will take a huge loss, but it will be necessary to check an unsustainable process. At that point, the people of Japan and other Asian nations will be able to consume a lot more, because they will send less of what they produce to the U.S. "They will not be producing for us; they will be producing for themselves."

Meanwhile, to attract savings from abroad, the U.S will have to increase interest rates into the double digits. This will cause a serious wave of defaults in the real estate market and elsewhere. "The further into the future this starts, the worse it will be for Americans," Schiff says.


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