The Dollar Bubble is reaching its final stages

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Soon food prices will begin rising, as the world is headed for a Catastrophic Fall in 2009 Global Food Production. Weather and credit conditions are causing falling production around the globe, and the world’s three biggest grain producers are all headed for big shortfalls. In India, torrential rains have devastated wheat crops, while in the US drought and freeze have damaged winter wheat. Meanwhile, Northern China was hit by worst drought in 50 years, and Chinese authorities have ordered three-month, nationwide audit of grain stocks as they are obviously very worried about whether China’s grain reserves actually exist.

Inflation in food commodities will push up gold demand cause manipulation efforts to break down. Already, the NYSE has runs out of 1 kg gold bars, and default on COMEX gold contracts is a month or two away. The collapse of paper gold (futures, unallocated gold, GLD, etc…) would destroy what is left of confidence in the US financial system, starting a panic out of the dollar.

Lesson learned from the financial crisis

The truth of this world is that those, who, through stupidity, greed, and fraud, dig themselves into a hole, will keep digging deeper until they hit bedrock and run out of options. This is what happened with Bernard Madoff: he must have known for years his ponzi scheme was doomed to collapse, but he kept it going until he was down to his last 140 million. The United States, like Bernard Madoff, has for years been digging itself into a hole, and the fed's use of currency swaps to boost the dollar is the final part of this process. Unfortunately, the US, like Madoff, is about to hit bedrock.
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