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John Williams continues:


“At present, the underlying fundamentals could not be much worse for the U.S. dollar.  Beyond trade, the key factors, relative to other major currencies, could not be much worse.  Despite any political and financial hype in the markets, the U.S. economy is relatively weaker, interest rates are lower, inflation is higher and fiscal policy and political stability all are relatively much worse than are seen relative to the other major currencies. 


Along with the Federal Reserve’s strategy to debase the U.S. dollar; the long-range U.S. fiscal insolvency and lack of political will to address same; and the still-deteriorating, record lack of confidence of the U.S. public in the U.S. government; will be of significantly greater import to global currency stability than what likely will be relatively short-lived difficulties in the euro area.


Many of these issues, however, tie back to the abysmal U.S. trade picture.  Consider the loss of higher paying jobs to offshore competition, which has been a major contributing factor to the structural income problems currently besetting U.S. consumers.  The effects from that have helped to drive the ongoing domestic systemic-solvency and economic crises, as is discussed more fully in Hyperinflation 2012.


U.S. Trade Deficit - Today’s (February 10th) publication of the December 2011 and Annual 2011 trade data show a deteriorating trade picture on both a quarterly and annual basis, as plotted in the following graphs.  Other than for the effects of wild gyrations in oil prices following the 2008 financial crisis, the trade deficit has seen regular deterioration since the 1970s. 


The nominal (not inflation-adjusted) series is most closely tied to dollar movement.  The more that excess dollars are pumped into the global markets, the weaker will be the U.S. dollar.  The real (inflation-adjusted) trade deficit also is deteriorating.  A widening real trade deficit subtracts from real economic activity, as reported in the GDP, while real trade deficit improvement is a plus to real GDP activity.




The above was just a small portion of another top shelf report by John Williams of Shadowstats.


To subscribe to ShadowStats CLICK HERE.


© 2012 by King World News®. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.  However, linking directly to the blog page is permitted and encouraged.



Eric King

KingWorldNews.com

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