US Economy
The US has been keeping their dollar low. This reduces the impact of their whopping debt. Would more devaluations be a good idea? What will President Obama do?
The present US debt has been used to fight a profitless war and to buy lots of cheap DVD players. This is not a very good investment in the infrastructure of the US economy.
Thus a useless debt must be eliminated as the debt didn’t increase the productivity of the US. Inflation might be another tool. This would be a very easy tool. You have the fed loosen the reigns and keep interest rates low while inflation gets a bit out of control. Say 14%. Well I don’t know where most of the T bills are priced but I suspect they can’t be over 5%. So every year of inflation that is 10% over your T-Bill interest rate basically drops your real debt by 10%. A year or two at that rate while avoiding issuing many notes when you do finally increase interest rates and thus increase yields. This could take a huge chunk out of the debt. But at the cost of some disruption to the economy. Also it kills the pension obligations for companies like Ford and GM thus freeing them up from a serious dead weight that is included in the price of car they sell. This might make a fed chairman look both bad and good. I suspect that this will be Obama’s first real test.
So what to do with this one. By holding equities any drop in the value of the US dollar will be compensated for by an increase in the value of the equity. The companies that will benefit the most will be old school manufactures and exporters. Car companies and maybe companies like Boeing (might be hurt by long term contracts priced in US dollars though)
So the real idea is to watch inflation and if it starts to approach 10% think about snatching up stock in companies like automakers.