What does the weak dollar really mean to an investor? We often read about large, disturbing macro trends, yet rarely think about the micro implications. What does it matter if the budget deficit is $800 billion, or 6.5% of GDP, versus the current estimate of $1.6 trillion, or 13% of GDP? Admittedly, the ramifications over short intervals of time are difficult to discern. This is one of the ways that policymakers sell programs such as stimulus checks or “cash for clunkers.†These programs are all about political posturing and creating the appearance of forging a solution. 
And while they deliver some semblance of short-term relief to a recession-battered public, crudely put, they are analogous to abetting drug addiction. Give the addict a quick fix and he’s momentarily liberated from his torment and sickness. The real solution, withholding the drug, requires a more painful short-term outcome but gives the addict a chance at recovery and renewal.
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When a country can no longer produce wealth, the aristocracy dreams up schemes to defraud the masses of their existing funds. Its always been that way throughout history and the USA today is no different.
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I’m still waiting for these programs to fix the US.
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Don’t forget … just like “cash for clunkers” … selling FHA houses with 0-5% down has brought DEMAND FORWARD IN TIME.
But Uncle Sam’s game plan is easy to see now … high gas prices will induce people to run down to the Chevy dealer and get that new $40,000 Volt electric car … purchased on credit compliments of Uncle Sam … next year. Bernake is determined to inflate the debt problem away. Wall Street likes the idea as they get free money. Google “federal flow of funds” to find out if Main Street is taking on more debt.
The next Fed Flow of Funds is scheduled to be released on December 10th. Even with “cash for clunkers” and “no money down” FHA home loans … I don’t expect consumer debt levels to increase from the previous report … which will indicate some day in the future the banks must “write off” more junk loans.
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