What Happens When You Have More Month Left Over at the End of Your Money?

This is a humorous and popular question from late night infomercials. Or it used to be, when I watched them years ago while tending to sleepless babies. But for those who experience it as a regular occurrence, it is anything but glib or funny.

Since the first of the year, we have lost three million jobs in the US. Those folks have lots of month left over at the end of their money. And as tragic as that is, there's an even bigger story brewing here.

As a result of rising unemployment, tax receipts have been down 14%. In April, we recorded a deficit for the month. Why is that significant? Because April is the biggest tax receipt month here in the US (you know, with April 15).

This is like saying you can't meet your monthly budget on the month when you get your biggest bonus of the year.

For the US, that's what April is. And if we have too much month left over at the end of our money now, what is going to happen the rest of the year?

Well, unless you live under a rock, you've heard about skyrocketing deficits, unparalleled borrowing, endless spending and uninhibited ambition.

Combine these factors with an unlimited commitment to print money, and we have the recipe for unequalled price inflation.

It took America 240 years to accumulate $9 Trillion in debt. And in one year we are adding $8 Trillion more. That's pretty sobering. The Congressional budget office is looking at deficits for years to come, and they haven't even factored in what will be the unmitigated damage caused by inflation. 

The government warned earlier this week that in only seven years, Social Security will be paying out more than it takes in. Our Medicare obligations are in even worse shape. Last year Medicare paid out more in hospital expenses than it took in...a performance they will repeat again this year.

Administrations have put off dealing with this issue. But the law of the harvest is coming true. What you plant, is what you reap. Planting financial foolishness, they are now reaping bankruptcy and insolvency. No one wanted to touch it, because there is only one way to fix it. Somebody is gonna have to have the guts to stand up and say so. But the elected officials who do will not be re-elected. They will likely be viewed as worse scoundrels than that group over at AIG. People will say their names in disgust, and spit when they are mentioned.

What does all this have to do with the FX stocks market? Plenty! A currency's value, just like everything else, is tied to the Law of Supply and Demand. When a government is committed to paying their bills by printing money, the supply of currency rises. Ipso facto, the demand for the currency falls. Falling demand is followed by falling prices.

In short, the Dollar is doomed. No one will stand up and do the things that have to be done. And if they did, assassination might shortly follow. So how do we profit from the falling dollar? Simple. Short sell it against other, stronger currencies. And when I say simple...I mean simple! Just a few clicks on your mouse pad, and you're in the biggest trading arena of all.

Of course, just because it is simple, doesn't mean it is easy.

Lots and lots of traders lose their shirts every year because they mistake those two ideas.

But just this week we closed a position that traded on US dollar weakness, and Australian strength. We profited 100% in just a few weeks. And by the looks of things, we should have plenty more opportunities as the US FED and Treasury, (in conjunction with the Chinese, Russians, Brazilians, and Indians) sink the dollar. We'll have more on the efforts of these other nations next time.