Serious Dangers in the U.S. Economy
Chipping Away at American Optimism
by Rick Barnard
“In fact, I think that was what was so amazing about Dr. Richebächer. He’s 86 years old, and he still has a fire in his eyes. As I’ve said, he constantly watches financial news channels. His housekeeper has a hard time organizing the daily stream of newspapers and magazines. And he’s now using the Internet for even more up-to-the-minute data.”
I returned to Dr. Richebächer’s apartment, and we immediately got back to work. For two and-a-half hours straight he answered my questions. Even when I had run out of tapes, he kept talking. My pen raced along to keep up.
Among the most important information Dr. Richebächer gave me some was what to expect in the next few months. More importantly, he told me what to do about it.
Serious Dangers in the U.S. Economy: A Look at the Near Future
First of all, avoid U.S. stocks. Dr. Richebächer foresees serious dangers in the U.S. economy, and the stock market will be the first victim.
Foreign stocks are only slightly safer. If the U.S. stock market sinks, it will take much of the world’s stock markets with it. A few foreign stocks could offer U.S. investors some modest returns, but only because of the currency exchange rate.
Long-term American bonds are in danger. If you must hold bonds, go short-term. Five years maximum…and even that may be too much.
Of course, after editing Dr. Richebächer for the last five years, I had mostly expected those answers. But then I asked about gold.
“I don’t touch gold,” he said gruffly.
My eyes almost fell out of my head. Just about every financial writer I know is a big fan of the yellow metal. I was about to tell him that, but he cut me off…
“Still, I have many good friends who are gold bugs,” he said, a little more warmly. “I know why they think it will go up. And I believe they are right about the price going up. But not for the reasons they say.”
“The simple fact is,” he told me, “the gold price is psychological. It has nothing to do with economics.”
I would argue that last point, since I have seen gold’s supply and demand figures. But I know I would quickly lose. Smarter men then I will have to debate Dr. Richebächer on gold.
There is still so much left for me to process. These past two days, Dr. Richebächer has poured a gallon of information into my shot glass of a brain.
I think Dr. Richebächer knows that. He has already proposed that I return in six months.
Of course, I told him that decision was not up to me. But I would like to come back.
And not in hopes of seeing younger women on the beach.
I left Dr. Richebächer’s apartment in sunny Cannes this morning and took a plane to foggy Paris for the night. (In fact, the plane was delayed because of fog.) Now I’m in a hotel right outside the airport, miles from the heart of the city.
It’s a good place to collect my thoughts…
So, if you’ll indulge me, I’d like to try to sort them out here.
Serious Dangers in the U.S. Economy: Revolving Around Economics
I’ve tried many times to put down exactly how much Dr. Richebächer’s life revolves around economics. Walk into his apartment, and you’ll immediately notice the many photographs and paintings on the walls. But you’ll also notice the many large bookshelves.
Each is stuffed with books on the economy. While many looked quite old, there were quite a few newer books in the mix, too. When I asked about his books, Dr. Richebächer smiled and said, “And this isn’t even all of them.”
When I heard that, I assumed that he chose to leave these books out for show. But I quickly learned that he refers to the books quite often. Several times he’d mention the work of another economists, then walk over to the bookcase and pull down a specific book.
Without even glancing at the table of comments, he’d open the pages. “Here,” he said, “read this.” And without fail, the quote would be relevant to what we were discussing.
In fact, I think that was what was so amazing about Dr. Richebächer. He’s 86 years old, and he still has a fire in his eyes. As I’ve said, he constantly watches financial news channels. His housekeeper has a hard time organizing the daily stream of newspapers and magazines. And he’s now using the Internet for even more up-to-the-minute data.
He explained that it was one of the few joys he had in life. “I only live for two things now,” he explained to me, “my grandchildren… and the other is my newsletter. I think the letter keeps me alive.”
It was a little sad to hear Dr. Richebächer talk about his mortality, though. He often talked how there are so few people left he could have a serious economic conversation with.
“There are few serious economists working in America today. Many of the ones I once knew are now gone.”
He likes to talk about how former Fed Chairman Paul Volcker and Henry Kaufman attended his retirement party. And he modestly remembers when France’s Le Figaro magazine called him the man who predicted the Asian Crisis.
But he also mentions how no one in America recognizes the trouble he sees. And after spending so much time with him, I have to wonder why.
Forget the fact that Dr. Richebächer has been right so many times before. Yes, he correctly predicted that Brazil’s real was about to collapse… and warned people away from U.S. Internet stocks not long after.
It looks like his numbers today are just as solid. Yet no one notices.
“It is almost as if Americans are afraid of any cracks in their optimism,” he said. “They completely ignore the negative.”
It’s a mistake that could soon cost Americans plenty. And Dr. Richebächer believes that things are too far gone to turn around.
Is he right? I wish I knew. As an American, it was tough for me to hear all the horrible imbalances in the economy. It was even worse to be shown the numbers.
The sad fact is, compared to the past; things were absolutely horrible this time.
“The numbers haven’t been like this since the Great Depression,” Dr. Richebächer told me.
In the morning I head back to America…and perhaps to the eye of the storm. I think I’ll take my time exchanging my euros for dollars.
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