Is the Dollar a Zombie?
The title of this entry is the same as the theme for the spring meeting of the Committee for Monetary Research and Education (CMRE) in New York in late May. CMRE is an educational group made of economists, journalists, think-tank researchers, investors and others interested in the principles of sound money.
Given the possible ramifications of the massive sovereign debt loads in western Europe, a better title for CMRE might have been “Is the Euro a Zombie?”
Pessimism prevailed at the podium. Here’s a sampler from some of the speakers.
Market historian Bob Hoye: The people in charge of financial policy reform know little about markets. The stock market rebound from March 2009 low was, historically speaking, a classic bounce-back from a financial crash, and it had to come to an end. Senior gold stocks will see much higher value in the future, and the Dow will be much lower. Junior gold stocks in the future will be much like tech stocks of early 1990s – the big party for that sector is yet to come
Investment manager David Tice: There will be higher interest rates and lower standards of living around the world, and higher gold prices. The inflation vs. deflation debate is yet to be settled. The big question is "What happens when people no longer trust their money?"
Former U.S. Comptroller General David Walker: Government is too big, it has promised too much and it has waited too long to try to fix its problems. The U.S. can’t grow its way out of the current troubles, and it can’t inflate its way out. Reliance on foreign bankers (50 percent of U.S. public debt is held overseas) is not in the nation’s long-term interest.
Heritage Foundation’s Bill Beach: Many governments enjoy creating dependent populations, and part of the dependency culture in the U.S. is that a high percentage of the population pays no federal taxes. This percentage is rising. To pay for growing entitlement programs, the U.S. government will likely turn to more deficit spending in the medium term and much higher levels of taxation in the longer term.
Barron’s columnist Jack Willoughby: The European monetary union can’t hold over time because there is not enough political integration in the eurozone. The U.S. is heavily exposed to the euro crisis through hundreds of billions of dollars worth of currency “swap lines” that the Federal Reserve made available to Europe.
Now I’m not necessarily endorsing any of these viewpoints, but they are well-thought-out by experienced observers, and they are worth offering up for discussion to a broad audience.
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The Dow Jones Industrial Average is a price-weighted average of 30 blue chip stocks that are generally leaders in their industry.