Welcome new reader!

Financial news I consider important, with my opinion, which is worth as much as you paid for it.
Please click HERE to read a synopsis of my view of the financial situation.

Tuesday, December 1, 2009

Dubai World and US Dollar

Dubai World
Quote from article:

“It is correct that the government owns Dubai World, but the decision when it was set up was that it should receive financing based on the viability of its projects, not on government guarantees. It’s not correct to assume that Dubai World is part of the government of Dubai. The lenders should bear part of the responsibility.”

Dubai world is a "flagship" financial company of the country of Dubai. That company is akin to Fannie/Freddie in the USA, where private sector assumed the government would back the companies debt in the event of a crisis.

In the USA, there is no amount too great to put onto the public debt load, in effect taking private companies and making losses public, while profits remain private.

In Dubai, so far, the country has not backed Dubai World. Do I think Dubai flinches and backs Dubai world, probably. But atleast that government is using this as an opportunity to strong arm compromises and political power before it assumes the private debt.

US Dollar

Within the next 12 months, the U.S. Treasury will have to refinance $2 trillion in short-term debt. And that's not counting any additional deficit spending, which is estimated to be around $1.5 trillion.

Put the two numbers together. Then ask yourself, how in the world can the Treasury borrow $3.5 trillion in only one year? That's an amount equal to nearly 30% of our entire GDP. And we're the world's biggest economy. Where will the money come from?

Click on the quote to read the full article. What we have here and now is the world facing the US debt machine and questioning if it should be backed by the world. This crisis of faith is reflected in the US dollar valuation. If the US behaves more like Dubai, making private companies take their own losses, or at the very least use the issues as leverage to maximize the governments position.

I for now, am voting against US dollar collapse, and therefore I am once again out of gold miners.

Remember, if your for a stronger US dollar, and therefore, a stronger America in the eyes of the world, you are in effect for the US stock market to fall. If you want the US stock market to rise, without making REAL changes to the financial system, then your for a continued policy of US dollar devaluation until the US faces total collapse, and more than likely US government instability.

I'm for a stronger US, and stronger dollar, let the chips fall as they may. 2009 was not a fun year to trade, 2010 is setting up to be a tad bit more exiting.