Subprime, the U.S. Dollar & a Recession in 2008

So far, credit card debt is holding up remarkably well, The Economist tells us. Goldman Sachs (NYSE:GS) says losses from credit card debt could reach US$99 billion – if the problems in subprime leak over to the credit card industry.

No problem so far…customers are still paying…which is a bit surprising, since you’d expect the consumer to be getting a little behind.

From the housing market comes this little note from an Australian reporter:

“The last one out of Cleveland, please turn out the lights,” writes Paul Barry. Says Barry of the Ohio city:

“…the streets are lined with empty houses, dead gardens and demolition notices pinned to the front doors. One in 20 homes are now in foreclosure.”

Turning to the dollar, The Economist quotes an unreliable source, your editor:

“The long term value of all paper currencies is zero. That is the fond saying of Bill Bonner, goldbug and publisher of the Markets and Money, a contrarian financial newsletter.”

Readers take note: we are talking about all paper currencies, not just the dollar. We guessed that the dollar would fall to US$1.50 to the euro. So far, it’s gotten about a penny short of the milestone. But it looks to us as though the dollar may want to correct…meaning, go up. In the long run, it is worthless trash. But so are the others. Which of them becomes trash first…well, we wish we could say. At this point, we don’t have an opinion. Will the dollar go up…or down? We don’t know. But we certainly wouldn’t want to keep our wealth in it.

The dollar’s value comes in some measure from the fact that it is the world’s leading brand. That seems to be changing. The greenback seems to be going out of style. Already, in the film American Gangster hip- hop musician Jay-Z flashes a wad of cash. The cash is 500-euro notes, not dollars. The big euro bills are already a favorite of drug dealers. Soon, they will probably be everyone else’s favorite too.

Meanwhile, as predicted here…corporate profits are falling. Bloomberg says there’s a recession in corporate earnings, and “the economy might be next,” continues the report.

“The earnings recession has already arrived,” says a Merrill economist, “We are going to see an economic recession in ’08.”

Bill Bonner
Markets and Money

Bill Bonner

Bill Bonner

Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America’s most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind Markets and Money.
Bill Bonner

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3 Comments on "Subprime, the U.S. Dollar & a Recession in 2008"

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barry broome

Here in U.S. everyone is living beyond their means. There is no group or agency devoted to explaining to people not to spend money – stop purchasing – save, save, save. Our economy is propped up on borrowed money and will crash sooner or later.

Hey, do you want to hear something funny? I went ot my local library to get some copies of the economist, but the librarian said that theyd on’t keep it any more because nobody was interested in reading it. How bout that! You can get a book on anything you like in the world except what matters. Do you want to know how to read an aura- hey no problem, they’ve got that. Do you want to know how to juggle, right this way is a book if you want it, but none of the masses want to read about… Read more »

I’m also kind of shocked that the Federal Reserve knows a U.S. Recession, as indicated by this paper…
shows that the recession will happen. Why is letting it happen so hard for them to do? Lately, as I’ve checked my blog stats, my post on the Yield Curve is the top post! I seems that some people do care, but the majority just want to be entertained, and libraries, competing with the Internet, are complying with the wishes of the masses.

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