Economists Starting to Freak Out

money cubeIt’s not every day that you see a doom and gloom piece in Forbes. From the article Doom For The Dollar–And Everything Else:

Doomsayers tend to be ignored–until it’s too late. This week, we give voice to five prophets of doom, starting with Peter Schiff, CEO and chief global strategist of Euro Pacific Capital.

Could the falling dollar mean we’re in for a major financial disaster? He thinks so.

He has been warning about the currency’s fall for a while now. Even though it lost a third of its value in the last two years against the euro, he believes it will decline even further. But, the dollar’s fall is more a symptom than a cause. The real problem is that the U.S. is producing too little–and spending too much–and the result is likely to be far worse than the happy-talkers on Wall Street will ever let on.

“We are going to go through one of the most trying financial times in U.S. history, including the Great Depression,” Schiff says. [emphasis added]

But it gets better with this Financial Times report — Central banks shift reserves away from US:

In a further worrying sign for the greenback, 47 per cent of reserve managers surveyed said they expected the growth of official reserves to slow to less than 20 per cent over the next four years. Between the end of 2000 and mid-2004, official reserves had increased by 66 per cent.

Slower reserve accumulation growth implies the supply of official finance is likely to become more limited but few expect the demand from the US for finance to slow. The consensus among economists is that the US current account deficit will increase to $694bn in 2005.

Wow, how long can the government keep pulling the wool over everyone’s eyes while the whole thing is falling apart? My guess is that once the real estate market tanks, they charade will be up and the full decline will come into effect. Shades of Argentina anyone?

1 Comment
  1. I’d rather the crash come now so we can fix this stupid mess. The general public will not wake up until the crash. It has to happen, others we’ll just advert danger for now, and put it off for another day.

    but yeah, it is a little eery that major news networks are reporting about the declining dollar on almost a daily basis… yes no one seems worried. Odd, no?