Signs to Watch

Posted: January 31, 2010 in Uncategorized

The purpose of this blog is to discuss signs to watch before the next collapse of our economy.  Our economy is clearly unsustainable, if you have any doubt check out http://www.usdebtclock.org.  After checking out our National Debt clock you will clearly see why this Ponzi Scheme of an economy cannot last.  Since the numbers don’t lie I would like to discuss red flags you should watch before the collapse.  Clearly our economy is being held together by a thread due to government intervention and the Fed’s unsustainable loose money policies.  So here we go.

1.  Gold and the Dollar Decoupling

Watching the Dollar Index in comparison to Gold will give you a good sign when shit will hit the fan.  In the past decade the good old greenback better known as the US dollar has lost 40% of its value, while that shiny yellow metal gained 400%.  Gold’s incredible increase over the past decade is mainly due to the decrease in value of our dollar and the explosive international interest in gold due to the lack of trust and confidence in the fiat system.  Typically when the value of the dollar goes down you will see the value of gold go up and vice versa, however recently we have began to see something unusual in few different instances.  In the past several months we have seen cases when the dollar goes up and gold goes up.  These cases have only lasted for a day or two however interesting non the less because it shows gold on its own, showing evidence the dollar and gold are not moving as historically seen.

For decades Western Nations have shorted gold to keep gold from competing against the dollar. Also Central Banks for years have been net sellers of gold now they are net buyers.   Before we see the last implosion of the dollar you should watch gold make big gains regardless to what is happening in the currency markets

2. Oil Price Inflation

For many years oil has trade exclusively in US Dollars.  This means the dollar and oil are clearly connected.  Oil will be the first commodity that show without a doubt inflation or hyper inflation in a dollar collapse.

3. Dollar loses reserve currency status

If any nation announces they will be dropping the US Dollar that is a warning.  The dollar is a very weak currency.  Even though the dollar has shown recent strength that will ultimately be short-term (maybe 6 to 10 months in my opinion) due to the massive levels of debt and that we are paying massive programs through borrowed money.  If a BRIC Nation (Brazil, Russia, India or China) announces they will no longer trade goods in dollar expect an immediate collapse in our currency along with US Treasuries.

4. Dumping US Treasuries

What we can track on this particular group is the amount of treasuries being sold to other countries.  Guess what? Currently other countries are buying very little.  The total debt is above $12 Trillion which does not include our unpaid programs such as social security and medicare, now we are looking a whopping $104 Trillion.  I know it is difficult to comprehend such massive numbers but is very important.

Currently the fed is accounts for a whopping 80% of all purchased debt.

5. Dow and Dollar Drop at the same time

Typically when the Dow goes down or loses value investors will remove money from stocks and put them into the US Dollar or Treasuries as a safe haven.  When investors do this the dollar will strengthen, hence when the Dow goes down the dollar goes up.  If there is an extended period when the dollar and the Dow fall that is not a good sign.

6. Jobs and Housing

Currently the Job market is simply not getting better.  Any short-term gains were simply due to the Holiday Season.  Those hired as temps will be laid off in the next couple months.  The U-6 report is true unemployment which is almost at 18% on a national level.  Washington is doing nothing but getting in the way of any real job growth.  Maybe the $5000 credit will help but it is by no means any solution.  The recent GDP number was high do to businesses adding inventory which is no job creator.  When these inventories do not move do to a week consumer you will see horrible GDP numbers.

Without jobs people are not going to buy homes.  We are about to see the second wave of ARM mortgages released on the market.  On top of that banks have a shadow inventory of homes on their books that they cannot release on the market place at one time or home values will collapse.  In Las Vegas, BofA just announced they will release 500 homes a month on the market place which will add to the large inventory.  The final nail in the coffin is the tax credit that when removed from the system will be devastating to the market.  People simply do not have any want to spend when their largest “asset” is falling every month.

7. Terror Attack/New War

Our economy is on thin ice. A major terror attack would knock us on our ass.  Our economy simply cannot handle the added stress.

Our military very thin and is costing our country added debt we simply cannot handle. Another war will hurt morale in the country along with added financial/security strains we simply cannot manage.

Most people do not have the time to follow current events or they do not know where to look.  There maybe other items that would be signs however this is a good start on things to watch that I would consider red flags.  Some are happening now.

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