Tags: hyman | growth | investing | dollar

Dismal Growth: One More Reason to Ditch the Dollar

By    |   Monday, 01 Aug 2011 07:54 AM

On Friday, the U.S. GDP data came out. It was one more reminder why people need some money invested outside of the U.S. dollar.

The GDP, which shows how the economy is growing, came in at a reading of 1.3 percent, which missed the estimate of 1.8 percent.

But what was worse was the revision from the previous quarter. The previous reading showed that the first quarter growth came in at 1.8 percent originally. But when the government reported the revision on Friday, it showed that the economy only “coasted in” at a reading of 0.4 percent. Now that’s worrisome!
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Needless to say, that crushed the hopes of investors that the second half of the year would pick up steam since the data is heading in the wrong direction.

But then when you add in the fact that the government is going to have to cut back their spending, that weighs on the growth too.

And consumer spending won’t materially pick up until more jobs are created. With unemployment creeping back up to 9.2 percent lately, more spending isn’t on the horizon there either. Don’t forget that consumer spending counts for about 70 percent of GDP growth.

Also, consumers won’t be spending more when gasoline prices are averaging $4 a gallon right now and food prices are escalating.

Without higher employment and lower costs, the consumer isn’t likely to open their wallets all that wide. Therefore, I believe that GDP growth will be sluggish for some time to come.
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In other words, stagflation (stagnant growth, yet high inflation) will be the name of the game for a while longer. That’s not good for job creation, consumer spending, etc.

And don’t figure on the government being able to pick up the slack. State and local governments are still strapped and the federal government has to still cut more spending.

Therefore, since this picture isn’t likely to materially change anytime soon, I know it’s still a prudent thing to get some assets outside of the U.S. dollar and into other superior assets.

It’s no wonder that gold, the Swiss franc, Aussie dollar and Singapore dollar all hit new 52-week highs against the greenback this week. In fact, the franc and gold are hitting all-time highs against the buck.

So obviously, some people are starting to finally see the light and steer clear of the “sinking economic ship” that the U.S. is on right now and instead put some money into countries that aren’t devaluing their currencies through printing money or by taking on too much debt.

Believe it or not, there are still some sound places to invest in the world. They are rare … they are few for sure. But they are out there. These economies mentioned above can make great havens away from the fallout of the U.S. dollar.

About the Author: Sean Hyman
Sean Hyman is a member of the Moneynews Financial Brain Trust. Click Here to read more of his articles. He is also the editor of Money Matrix Insider. Discover more by Clicking Here Now.

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SeanHyman
On Friday, the U.S. GDP data came out. It was one more reminder why people need some money invested outside of the U.S. dollar. The GDP, which shows how the economy is growing, came in at a reading of 1.3 percent, which missed the estimate of 1.8 percent. But what was...
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2011-54-01
Monday, 01 Aug 2011 07:54 AM
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