Blogging from the Highlands of Scotland until I return to the Murcia region of Spain in the Autumn for a month or so
'From fanaticism to barbarism is only one step' - Diderot

Friday, 26 November 2004

Is the end nigh ... economically speaking?

I have thought for many months, indeed in a less urgent way for a number of years, that the world is long overdue for a major economic correction. Over the past year, in particular, I have begun to feel that this correction cannot be delayed for very much longer, specially since the alarming growth in the US trade and budget deficits has become more widely known - the last figure I had heard was that the US required USD2.0bn of additional borrowing, every day. Now I read that the daily borrowing requirement is now estimated at USD2.6bn a day!

Stephen Newton has a very interesting post about the possible imminence of the trigger that will unleash the financial, economic and human maelstrom that would very probably follow (I know I am using 'purple' prose here, but the situation warrants it). The Economist heads its Buttonwood column this week 'The dollar’s demise' (probably available for subscribers only); persevere with this depressing article, and make sure you read the final part 'Get out while you can'. I wrote about just this matter in the final line of my post when the results of the recent US Presidential election had become clear, although I touched on the interest rate (if not the currency) implications in this post in June 2004.

The great danger with this kind of situation, apart from the underlying fiscal ineptitude of the current US Administration itself, is that talking about the risks will panic people into a stampede away from the Dollar - this will make absolutely certain that what we (or at least I and many others) fear is going to happen, does happen. I leave you to make your own judgement as to how you need to proceed yourself. Recognise, though, that it will be almost impossible for most of us to insulate ourselves from what may be coming; at least you can make your personal situation a little less perilous by being very cautious about using your credit cards between now and January. I am one of those people who has no debt of any kind, but even a creditor like me risks being caught out; if you have significant personal debts, then your situation is probably a lot worse. Now, 'Have a nice day!' folks.

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