And Nero fiddles...

Surprise! The dollar is continuing its slide, accelerated somewhat by last weeks disappointing employment numbers. Economists were expecting in the neighborhood of 200,000 jobs, only about 112,000 were created.

As a result, Japan is now threatening a huge dollar sell-off to protect its fragile economic recovery. According to Kaoru Yosano, chairman of Japan's Liberal Democratic Party's policy committee, Japan is going to ask for a strong dollar policy from Dubbyuh's administration that amounts to something more than vague talk. Japan is also going to ask other G7 nations to demand that the Administration deal with the massive deficits that are the driving force behind the dollars slide.

But when we look at the policy stance of Dubbyuh's administration, social security privatization and tax-cuts, will deliver a $2 trillion plus hit to the US budget in the years to come. This could lead the US to a situation similar to Argentina, which followed similar policies and wound up defaulting on $100 billion in foreign debt in 2001. Given the size of the US economy, its outstanding debt overseas and its foreign trade deficit, the effects of such a collapse in the US are magnified far beyond the scale of what happened in Argentina.

The situation is reaching a point where Stephen Roach, of Morgan-Stanley, gives the US only a 10% chance of avoiding "economic Armageddon". This bearish outlook is being echoed by many others in the economic community.

The fact that Dubbyuh and his merry band don't find anything particularly worrisome here should give us all pause to wonder just how long our very own American Nero is going to continue to fiddle. With the US soaking up nearly $2.6 billion a day over overseas just to keep the doors open in Washington, one cannot help but wonder when the excrement is going to intersect the fan-blade. When it does, don't blame me...I didn't vote for his dumb ass.

Our only consolation is that the mid-term elections in '06 will allow us to put those members of congress, who have permitted the administration to spend tax-dollars like a drunken sailor on liberty, out to pasture. Hopefully, it won't be too late at that point, but it's not looking good.