State budgets in terrible condition

When Glenn Beck makes sense to me, I get scared

I caught a Glenn Beck rant on the dollar collapsing and comparing it to Russia, 1998.

Frankly he made some sense, which scared me.

I do not see inflation, I see deflation, which is why I"m not running out and buying Gold, but I must wonder if Gold is going to be a bubble because so many TV ads plus talking heads are talking about the collapse of the U.S./dollar.

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Deflation and gold

Deflation doesn't preclude a falling dollar. Everyone likes to point to Japan as a comparison, and there is certainly a lot in common.
But Japan could fund its own debt, unlike America.

What I point towards is Argentina. A lot of people don't know this about the Argentina collapse of 2001, but they had deflation - the classic definition of deflation. The monetary supply in Argentina collapsed, meaning there were fewer pesos around. This is sort of what is happening in America on a smaller scale.
Normally the laws of supply and demand would make the peso increase in value if there are fewer of them. However, Argentina didn't fund its own debts. It relied on outside creditors.
Thus while the Argentina monetary supply collapsed, and people had less access to money to live on, their currency collapsed by 70% against all other currencies. So the purchasing power of the peso fell faster than the deflation of the shrinking monetary supply. This is also what is happening in America on a smaller scale.

I've been thinking about doing an article about this, but haven't found all the resources I want yet.

As for gold, the ads you see are for you to sell your gold to them. Gold won't be in a mania until you see ads for you to buy their gold.
Also, gold isn't moving like a bubble. It isn't jumping 20% a month (like Nasdaq in 1999, or housing in 2005 in some places). It's moving at a very slow and consistent pace as its fundamentals improve (more consumers, less official sales).
Right now gold is in Stage 2 of a bull market, where the smart money moves in. Stage 3, which hasn't hit yet is when the public moves in. When neighbors start to brag about their bullion purchases and gold mining stocks the same way that they were talking about their "investment homes" in 2005, or dot-com stocks in 1999, then it will be time to get out of gold.

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Argentina vs. US M1 + outsourcing

But in the U.S. Helicopter Ben has put the money supply on steroids, so it appears that the velocity of money dropped like a stone, but we have "gobs" of money supply....to counteract deflation, so I don't think it's quite the same.

Didn't Argentina plain default?

I agree doing a series on Argentina, S. Korea, Thailand and Russia would be awesome intel. I also went digging around and posted what I could find on it but not enough detail to really understand what was the primary cause of those collapses.

I'm also wondering with so many believing the dollar is plain going to collapse if we're getting a lot of fear behavior vs. metrics and reality.

Hey, Roubini today said the "O" word on why jobs aren't coming back and why unemployment is permanently screwed.

He mentioned offshore outsourcing of manufacturing and services.

It's just unreal how you cannot get economists to even breath that word, yet at this point I do not believe there is a single person in America who doesn't know someone who's job was offshore outsourced or they were displaced by a foreign guest worker (same thing, they use guest workers to often transfer technology, projects and skills....offshore).

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Stagflation 2.0?

What if this is a new type of stagflation? Where the deflation is in demand and assets, and inflation in the cost of capital (given that it is now global, and in the form of interest rates) and commodities?

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State Budgets are Easily Salvageable

As I have posted here before, the States have the solution to their budget problems within their grasp, but States do not appear to see the solution.

State policy makers need to understand that their paradigm of dependance on the Uncle Sam handout teet only further's the Keynesian self destruct debt syndrome destroying this country.

States can stand on their own feet. They gave the federal government it's power (not the other way around) and that power lies in their remaining assets and dwindling revenues. They should take advantage of the opportunity to harness that power while they still can.

http://letthemfail.us/archives/1478

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