What Is Roiling the Dow And Disturbing Global Economics?

Taking two steps backward and only one step forward, the Dow recently moved from above 10000 to below 8200 points. Historically, lowered interest rates, from a percentage perspective, have failed to stimulate the economy. In addition, lowered rates have failed to encourage the Dow to discount the future increase in economic activity. Unless the US economy shows signs of improvement, it will present a severe underlining predicament. Operating from this premise, it is safe to assume that the stock market does not prosper in an environment dominated by uncertainty. The difficulty arises in identifying the culprit causing the Dow to become intimidated and plummet.

There are numerous problems embracing the US economy today, and all of these problems have failed to escape the conscientiousness of serious investors. These problems have disturbed the integrity of the market, roiling already battered stocks and sectors. Current potential problems facing the economy are past corporate scams and phony accounting methods, an escalating war against terrorism both at home and abroad, the potential war against Iraq, the price of crude oil (OPEC), labor unrest and strikes, the overvalued dollar, and, finally, the one problem that is seldom addressed, the Global Fiat Dual Monetary System

Only the more sophisticated investors and money managers are discounting the latter as a potential problem. If the latter ends up perpetuating a discernable obstruction, then two additional dilemmas will proliferate as symptoms of a failing monetary system-very low interest rates and the overvalued dollar. During the 1920s when the Global Exchange System of 1925 was failing, our government came to its aid. The Fed kept interest rates too low for too long, causing a US stock market bubble. The US could again aid another weak or failing monetary system.

Four monetary systems failed during the 20th century. They instigated wars, genocide and massive economic destruction. The latter includes the loss of two-thirds of our nation's gold reserves during the 1960s. One could accurately phrase the consequences of these past failed currencies as the four economic horsemen of the apocalypse. (See September's Investment Tracker editorial located at this website for more details).

This frightening and hysterical period in economic history is downplayed and avoided by the media. An appropriate analogy would be passing wind in church. Few know how to handle such a situation, so they simply pretend as though it did not happen. That is why the world and its various economies recur one failed currency after the other. It goes without saying that if our economy's current monetary system is in danger, very little has been discounted as of yet. The inability and reluctance of the global economy to move past an almost three-year-old period of economic weakness could be a warning of a crisis ahead!

One final thought to ponder. The past failed systems were backed by gold. The current system, however, is backed only by faith. In retrospect, no fiat monetary system has ever succeeded for any length of time.