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The Imminent Crash

By: Steve Johnson

2/6/2008 - 14 Comments

I would like to think that we as a nation learn from history, but that is just not the case. 

The government has repeating the same mistakes made in the 1920’s and 1970’s, creating financial bubbles that eventually pop.

Bernanke & Co. is following the same path last week with an emergency 75 basis point rate cut and a 50 basis point kicker on Wednesday. Not to be outdone, the House of Representatives and the Bush Administration slapped together a $150 billion “stimulus package”.

This is absolutely crazy.  They are only temporarily delaying the coming recession and in the process, creating a much bigger problem that will only lead to a much deeper recession. The value of the dollar is about to plunge – which is sure to drastically reduce many people’s savings and retirement funds and create a huge spike in inflation. 

I’m not sure why everyone is going along with this, but this is surely going to lead to a financial crash. I just don’t see any other way around this.  This is perhaps the biggest financial crisis since the Great Depression.

Instead of spending the nation into bankruptcy, we need a national movement to cut back and get out of debt.  The housing bubble has burst and the Fed is once again slashing interest rates and printing money to encourage more SPENDING.  The country is in desperate need of a period of saving and economizing.  Yet they are encouraging the opposite behavior.

The smart money is getting out of US dollar investments and into foreign assets or currencies, as investors Jim Rogers and Peter Schiff are suggesting.

Reference article: It’s going to be much worse

But the little guy doesn’t have any money to move and the middle class has their money trapped in their 401k invested in the dollar traded US stock market. If the value of the dollar drops by 10% this year, then your stock values have to increase by 10% just to break even. 

Some people say that the value of the dollar doesn’t matter. The reason they say that is because they don’t see anything changing. However, inflation is coming with a vengeance. China is projected to increase their product costs by 10% this year alone. 

Reference article: China Inflation Spike Set to Rock U.S. Consumers

During the 1980's recession, the annual inflation in 1979 peaked at 13.3 percent and annual unemployment reached 9.7 percent in 1982.  It may take a few more years before inflation gets this high, but there is no doubt that it is coming, and when it gets here we will be talking about how stupid Bernanke & Co. was for what they just did.

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