Tuesday, November 25, 2008

Riots in Iceland as economy darkens

Look at events playing out in Iceland, where an economic collapse is now bringing riots in the streets...violence!

As Americans rail against bailouts and increased government spending; as our leaders preach constraints, sacrifice and shared pain, we impede our ability to get us out of this crisis.

This is no time for fiscal restraint, yet that is what the Obama team is proposing: new spending balanced with new spending cuts. Where is the stimulus? States and local governments face severe cash shortages and looming cutbacks in services.

We risk bringing on a broader and more long-lasting downturn under this sort of approach. Look at Iceland and don't think that America is immune to this type of social diorder and chaos.

1 comment:

googleheim said...

One word for today : ARGENTINA

The bank failure of Argentina in November 2001 is a working example.

They artificially pegged the peso to the U$ dollar 1 to 1 during the 1990's.

Menem, president in the 1990's, followed the Bush / Schultz / Neocon algorithm of privatization.

Result : Argentina was burdened by debt, leverage, supposed capital flight, etc

Globalized by Spanish, French and Italian multinationals, Argentina of coursed blamed USA and EU.

They had to float their currency and it devalued to 1 U$D = 4 Pesos.
No much compared to Turkey, Russia, Mexico, and Asian melts.

However, it illustrates the point of the magnitude what is happened here :

Argentina population : 30 million

US Pop : 300 million

Argentina default : 250 billion

Estimated ( by me ) US Default is a factor of 10 as per population differential, so US Default is actually 2.5 trillion.

However, US currency is strengthening and all currencies which are artificially pegged to dollar :

El Salvador pegged 1 to 1 with USD.
Will this help or hurt ?

China artifically low.
Will this help or hurt ?

When does floating help and when does pegging help ?

If we would have SPIKED the U$D more, then we would have broke up the Chinese
and the Russian analyst can now eat his tofu.