Wednesday, October 07, 2009

UPDATE: Is this the fall of the US?


New in today is that the gulf states are reconsidering the pricing of oil in US Dollars. They're considering a basket of currencies and commodities.

This is exactly what I suggested might be the outcome in my previous post. Do the sheiks read this blog....?

The US Dollar could only defy gravity for so long. The crime as been the US government and Fed presiding over deficits for this length of time.

It is equivalent to a household borrowing money to pay for living expenses (including lots of luxuries) and then each month getting more debt to pay for further expenses - and to pay off the previous month's debt. Eventually, banks are going to say, "Hey, we'd don't believe you'll be able to pay us back."

Now imagine the household is buying on credit at stores and borrowing money from banks to pay off the accounts. Imagine the sore keeper starts to get worried about your ability to borrow to pay your account, and stops giving you further credit.

That is exactly the situation the US faces.

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