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Its the end of the world as we know it (and I feel fine)

10 October 2008

OUCH! It’s counter-intuitive that the Peso keeps dropping … Mexican banks are in no trouble, the only housing crisis is that there aren’t enough being built fast enough to meet demand, and the Banco de Mexico is unloading dollars by the billions from its huge foreign reserves there is the assumption that the peso SHOULD fall when the U.S. economy goes in a tailspin.

While of course, with Mexico dependent on the U.S. as its largest customer for consumer goods, commodities and agricultural products, there will be less dollars coming in, and growth will be flat for a while, things aren’t all bad by any means. Besides being a perfect opportunity to make your donations to the Mex Files stretch much further there are some likely long-term benefits. Mexican consumer goods are made for a resource (and cash) limited market: manufactured goods like washing machines, not to mention automobiles and trucks, made for the domestic market (smaller and using less energy) have been on the market for years. With the cheaper peso, they might do better in the U.S. market against the overbuilt products now available.

Secondly, while the luxury tourism business is going to go to pot, and what U.S. market there will be for foreign travel in the dumper, Mexico will be the only travel option available for most tourists. Retirees who find themselves priced out of higher end U.S. locations are likely to consider Mexican destinations as well.

And… Mexico has already been through most of the financial upheavals that will unsettle the United States. Bank nationalization and restructuring is done; the country has a healthy reserve in a basket of foreign currencies to carry through bad times. And — though the present administration has not been as aggressive as I would hope about it — finding markets outside the United States, and building a stronger internal market is in the country’s long-range interests.

In the short term, the government is making the right mores, looking at basic Keynsian, “New Deal” projects — more spending on infrastructure, flexibility in that spending, a speeded up refinery building project, assistance to small and medium-sized business and lowering tariffs on exports outside the NAFTA region.

HOWEVER– and I did a “huh?” when I read it (and then double-checked with Otto, who actually knows something about finances) — the Calderon administration is also trying to sneak in a proposal to let PEMEX invest earnings without government oversight. In the stock market? Don Felipe… are you on drugs?

2 Comments leave one →
  1. 10 October 2008 6:26 pm

    “HOWEVER– and I did a “huh?” when I read it (and then double-checked with Otto, who actually knows something about finances) — the Calderon administration is also trying to sneak in a proposal to let PEMEX invest earnings without government oversight. In the stock market?”

    Which is similar to what George Bush was so hot to do in the US, with privatizing Social Security, and letting US people invest their Social Security dollars on their own, in such things as the stock market. Which would now have made the phrase “Social Security” in the US an oxy-moron. Luckily this did not happen, and it is still somewhat of a security for society.

    – Steve Gallagher

  2. Mr. Rushing permalink
    11 October 2008 11:33 am

    Uh, why should I not have the ability to INVEST 20% of MY own Social Security funds?

    Please exlain why letting the government have even more control in the economy is a good idea. They are the ones who ran government Sponsored businesses like Freddy Mac and Fanie Mae and ruined the housing market.

    As it is now Social Security has been raided by the government and funds have been diverted for general spending. There will be 3 workers supporting only one reciepient of SS in the future.

    If SS was a private investment it would have been investigated by the SEC a long time ago. There is no such thing as a bigger scam than SS, a retirement option that only returns 1% of the money that you have invested in it.

    So if your tax dollars have put in well over $100,000 in it within your lifetime, you would only get $1,000 back.

    If they would have just put that money in a 0% interest savings account and handed it to you on your retirement, an average person paying $500 a month for 47 years of work would have recieved a lump sum of $282,000. If he had planed to live until he was 71 years old, he would
    receive $3,961.66 a month. Ask anyone on SS how much they are getting a month and see how much they had contributed each year to it and you will see why it is such a stupid idea and how a little personal responsibility would have made this a lot better.

    George W. Bush’s plan for SS is a good idea. People should be entitled to 20% of their money that they contribute to invest in diversified funds as they see fit.

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