Outlook for US Economy and US Dollar worsen

By Benjamin Train
Online Consultancy Network

As the U.S. Dollar plunged today, gold jumped $13.40 an ounce overnight to reach $734 an ounce, (a 28 year high), and a new rally is underway!

The stage is set for the small-cap and microcap resource stocks which have lagged, to make a comeback and play some serious catch-up. To find out more visit:
http://www.hedgehogtrader.com/marketview.html

Dollar plunges on fears Saudis might drop peg Euro breaks above $1.40for first time; parity for Canadian dollar.

By Lisa Twaronite & Polya Lesova, MarketWatch

Last Update: 12:42 PM ET Sep 20, 2007

NEW YORK (MarketWatch) -- The dollar fell sharply across the board Thursday, hitting a new all-time low against the euro and parity with its Canadian counterpart, as lower U.S. interest rates and a report that Saudi Arabia might be signaling the end of its currency's dollar peg put the greenback under heavy pressure.

The Canadian dollar reached one-to-one parity with the U.S. dollar in early trading, marking the first time this has happened since November 1976. The dollar was last trading at C$1.0015 after trading as low as C$.09996, down from C$1.0155 Wednesday.

The euro broke through the $1.40 level into uncharted territory for the first time, just two days after the Federal Reserve made an aggressive cut of half a percentage point in its benchmark interest rate.

The euro, from $1.3971 late Wednesday, was last up 0.9% at $1.4092. It earlier rose to $1.4097, its highest level since the 13-nation currency began trading in January 1999. The trade-weighted dollar index, which tracks the performance of the greenback against a basket of currencies, dropped 1.0% to 78.505.

The index hit a new 15-year low. "The environment has been developing for a U.S. dollar bearish move," said David Watt, senior currency strategist at RBC Capital Markets. "A weight of evidence has been accumulating. The Saudi Arabia story was the last straw that suggested that the U.S. dollar could retest its all-time lows."

The greenback also fell 1% to 114.86 yen, even though Japan's 0.5% interest rate is the lowest in the developed world, and even dropped against the British pound sterling, which has taken a knock in recent days on worries about the U.K. banking system.

The pound was trading at $2.0115, compared to $2.0010 late Wednesday. The dollar has fallen significantly against most major currencies since the Fed made a larger-than-expected half-point cut in both its federal funds target as well as the discount rate on Tuesday, in a move aimed
at preventing the credit woes from the subprime mortgage meltdown from dragging down the broader economy.

Lower rates erode the returns on dollar-denominated assets, so the Fed's announcement sent the dollar into a tailspin against every major currency except Japan's low-yielding yen.

"The U.S. dollar is clearly being sacrificed by the Federal Reserve in a last ditch effort to save the mortgage bankers," said Ned Schmidt, editor of the Value View Gold Report. "Foreign investors would be foolish to buy U.S. investments knowing that the value of the dollar will decline," Schmidt said.

Saudi Arabia mulling peg drop? Further fueling bearish sentiment on the dollar, a report in the U.K.'s Daily Telegraph newspaper on Thursday pointed out that Saudi Arabia's central bank didn't take action in the wake of the Fed's rate cut.

If you are interested in reading about the economy visit the many economic sites we have links to on our Web site, and read in depth study and overview of the US economy, in this book by Peter Peterson.
http://www.amazon.com/Running-Empty-Democratic-Republican-Bankrupting/d
p/0312424620/ref=pd_bbs_sr_2/105-7810650-2586863?ie=UTF8&s=books&qid=11
90320778&sr=8-2

A recent, well-publicized study by USA Today put the total of unfunded promises by federal, state and local governments at $59 trillion. That isn't total promises or future dollars (which would be much higher), it is the present value anticipated shortfall compared to the current tax structure.

The overwhelming majority of this total is federal promises to future retirees in the form of Medicare and Social Security.

That many trillions is hard to relate to, so USA Today put the numbers in per household terms.
The average American household is in debt for $516,000 to cover unfunded government obligations, or more than four times the average mortgage and credit card debt per household.

To pay off this debt, each household would have to pay $31,000 per year for the next 75 years.

A link to this article is:
http://www.usatoday.com/news/washington/2007-05-28-federal-budget_N.htm

UNFUNDED BALANCE DUE

Source: USA TODAY research; numbers rounded The cost per U.S. household of unfunded promises made by federal, state and local government:

Medicare $255,280

Social Security $144,251

Federal debt $43,380

Military benefits $25,863

State and local debt $17,537

Federal civil- servant benefits $14,374

State and local retiree benefits $13,114

Other federal obligations $2,548

Total $516,348