Window Washer outside of office

Cash for Clunkers and CPI

I read that the government is going to use the $4500 for the Cash for Clunkers as a price reduction for new autos. That means that the Consumer Price Index will be reduced, as autos make up part of the index. Social security and other programs use the CPI to compute payments.
Holmes

Health Savings Accounts

I keep reading about how Health Savings Accounts are going to solve health care so I did some (brief) studying. Basically, it's like an IRA. You put money in, before taxes and carry a high-deductible health insurance plan.

The problem is that most people don't save their money. This plan only works for diligent savers. As someone who is privy to people's finances, I can tell you that this would only work for a small percentage of the US population.

This plan would never work in a country where many folks have a negative net worth. You know exactly what I'm talking about.
Holmes

Supply of money

Faber Says ‘High’ U.S. Deficit Will Spur Inflation

By Elizabeth Campbell and Millie Munshi

Sept. 9 (Bloomberg) -- Investor Marc Faber said government spending and low interest rates will keep the U.S. deficit “very high” and will spur inflation.

Interest rates will be kept “artificially low” and remain “near zero for a long time” in the U.S., Faber, the publisher of the Gloom, Boom & Doom report, said today in a presentation broadcast on the Internet. “The deficit will stay very high and that will create some kind of more inflation down the road.”

The Federal Reserve is likely to continue to “print money” in an effort to boost the U.S. economy, and that, combined with low interest rates, will spur weakness in the dollar, Faber said. U.S. President Barack Obama has pumped up the nation’s marketable debt to an unprecedented $6.94 trillion as he borrows to spur the world’s largest economy.

“Money printing will be unprecedented because the deficit will need to be financed,” Faber said. “The weaker the economy, the more the stock market will go up because the money that is being printed will go into” speculative assets.

Faber, who recommended buying U.S. stocks in October, before the biggest rally in more than 70 years, said investors should buy equities instead of bonds or holding cash.

“If the dollar is weak, there is a very good chance that equity prices could rise quite substantially,” Faber said. A weaker dollar is “good for asset prices.”

Buying Commodities

Faber also recommends that investors buy precious metals and other raw materials to hedge against declines in the U.S. currency. Before today, the greenback slid 4.9 percent against a basket of six major currencies this year and the 19-commodity Reuters/Jefferies CRB Index climbed 10 percent.

“The dollar will continue to implode against commodities,” Faber said. “I don’t see why someone would hold dollars and not own gold. More and more people will come to the realization that they have to own some resources, some commodities, some mining companies and some physical precious metals.”

Global economic growth won’t recover to pre-recession levels, Faber said.

“I don’t think consumption will come back,” he said. “I don’t think there is much of a recovery. You have to differentiate between the stock market and economy activity.”

To contact the reporters on this story: Elizabeth Campbell in New York at ecampbell14@bloomberg.net; Millie Munshi in New York at mmunshi@bloomberg.net.

Richard Russell comments on gold

Why the rush into the monetary "safe haven." Oh, by the way, they don't want you to know it, but GOLD IS MONEY! And it has been for 5,000 years. Hmmm, what paper money has lasted for 5000 years?