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Day Of Reckoning

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by Mike Hoy

July 31, 2007


The only trigger I see that would change my thinking would be a rise in interest rates. If the Fed decides to start raising interest rates all bets are off and I will go short as I know the US housing market and the US financial system will not be able to sustain another round of interest rate increases.

Many people argue the fact that if rates are not increased the Dollar will fall out of bed. My opinion is “so what?” If the Dollar continues to fall exports are going to increase and imports will decrease. This should have a positive effect on employment and may be the first step to repatriating many jobs that have been shipped out of the country. Jobs I believe must come home if the US is ever going to regain its status as the Country on top of the “pile.” I see nothing wrong with putting Americans back to work. After all, I believe the Dollar has already been monetized.

Many people fail to recognize that a little inflation is not a bad thing so long as wages keep pace.

In a nutshell, “the more things change the more they remain the same!”

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US to sell $20bn of arms to the Gulf

The Bush administration is expected to announce a massive series of arms deals in the Middle East tomorrow that are being seen as part of a diplomatic offensive against the growing influence of Iran in the volatile region.

The centrepiece of the deals is an agreement between the US and a group of Persian Gulf nations, including Saudi Arabia, that could eventually be worth at least $20bn, according to news reports.

US dollars head to the far-east traded for consumer goods, these dollars are spent by China etc buying oil from middle-east countries, in order for these dollars to find their way back home the US destabilizes the middle-east, causing countries around Iran to increase defences so these dollars get spent on US built arms which reduces the budget deficit and safeguards jobs in the US.

They slowly devalue the dollar making US exports cheaper and further reducing the budget deficit. Standoff for now but what happens next?

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