Tuesday, May 12, 2009
Saturday, May 2, 2009
The Master will become the Slave
A vicious cycle is going to happen.
1. All Starting by the current US government deflating the value of the dollar by trying to reverse the situation and therefore printing and borrowing more money.
2. At some point the dollar value will drop like a rock.
3. Then the Chinese will understand that their dollar reserves are deflated and try to get out of their dollar holding by using it to buy real assets around the world, buying metals and other basic commodities, as well as real assets in USA, as well as shares in the top 500 public companies in the USA. This Chinese dollar sellout will even intensify the dollar drop in value. Because the Chinese will not want to impact their own dollar holdings by selling much of it, they will do it quietly, buying anonymously more and more assets, which will make it very hard to track, but one day we will wake up to a new reality in which the Chinese government will become the new landlord of American top assets, or basically the new landlords of America.
4. There will be a very high inflation in America, the dollar will be worth much less. everything will cost a fortune and salaries will stay low.
5. The American people will need to move from service industries to manufacturing, but this time, they will get a small wage working for a Chinese owner, something very hard for us to adjust.
6. America will become the new China of cheap labor, not allowing the people to enjoy all the luxury but rather work for keeping them alive.
15-20 years from now, looking back into history, it will be seen that a combination of:
a. Decades of hard-working Chinese, saving their incoming dollars by their government, making the people save as much as possible while getting more and more American manufacturing outsourced to China,
b. And at the same time a corruption of American society, making it into an "Obese" mentality created by two factors:
i. The US Credit concept that allowed Americans to live beyond their means, with the option to borrow and re-finance at any point, both at the individual level as well as the corporate level and at the government level,
ii. And the prevalent of the social concept of consumerism that saving is bad and spending is what defines us as Americans,
have created a situation that the Master(Americans) became the Slave(cheap Chinese laborers) and the slave became the master. because the Master(Americans) have Borrowed money from the slave(cheap Chinese laborers) to buy his cheap services for years and now when it is time to pay back the loans, the slave comes to claim the Master house as a payout.
Unfortunately, this will be intensified by the current US administration that deflates the dollar even further. The new administration should have tried to stop the crisis at the last minute by doing Only three things: (i) Letting the markets take care of themselves, including letting large corporations to fail (ii) Reversing the spending and start saving both on a national level as well as encouraging individuals to save on a personal level, And by (iii) Start manufacturing more and giving private entrepreneurs incentives to manufacture more in the USA. But instead the US administration will continue to borrow and print money to artificially reduce the pain in the short term on expense of America’s long term future. The truth is that the administration is expected to do this by its voters as no nation has ever been in such a situation before and therefore nobody really knows what should be done. What American do want now, is a quick pain relief so instead of dealing with the real problem we take the shortcut pain-killer and let the CANCER grow ten times in size.
It's like laws of physics, there cannot be something out of nothing. There cannot be a way for a government to take us out of a hole (debt we took for so many years) by borrowing more money. In order to climb out of the hole we need to roll up our sleeves and climb, but as you may know, for an Obese it is very hard to climb.....
