Thursday, November 4, 2010

Reacting to the election

I'm pulling all the cash I can out of America. The exchange rate - already insanely at parity - can only get worse.

My prediction is that the Republicans will stay true to form. They talk a lot about fiscal restraint but they always spend money like there's no tomorrow. So the economy should actually get a little better as government spending goes up. However, I expect that to lead to higher interest rates and inflation.

On the other hand, I could be wrong. The Repubs could actually shut down the government and block any spending. This would lead to an even worse economy and the dreaded deflation. In that case holding cash (instead of assets) would be better - but since the US will be in so much trouble, the exchange rate will probably get worse despite the deflation.

I don't know; I can't predict the future (I can't even predict my future six months ahead, as should be obvious by now), but I think it's going to be a tough two years.

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