Thursday, August 12, 2010

U.S. Dollar Now Ripe For Catastrophic Devaluation

By Giordano Bruno
Normally when I cover subjects in the economy, I try to take a “macro” approach, giving an overall view of various financial elements around the world and how they are clearly connected to one another in a greater synchronous social force. That is to say, in Chinese domestic consumption, or European debt obligations, or Russian gold reserves, and in many other factors, is encoded the very future of our own American economy. Showing others how to decipher that code is my primary mission.
In this instance, however, I would like to focus chiefly on the U.S. Dollar, the private Federal Reserve currency which is now the basis for our entire financial system, not to mention a substantial basis for trade around the globe. For decades, the dollar (and by extension U.S. Treasury bonds) has been the standard by which foreign nations safeguard capital reserves, denominate debt, and in some cases have even pegged their own currency to maintain advantageous trade deficits. In the past, the Greenback has been treated as good as gold. Though many see this as a windfall for Americans, it is actually a very unfortunate circumstance.
The “world reserve” status of our currency created a demand for dollars, but through this, it also created a glut of Treasury bond holdings in foreign central banks, and an unserviceable national debt here at home. The combination of removing the dollar from the gold standard in tandem with gaining world reserve advantage allowed our government along with central bankers to create the most precarious illusory fiat currency in history. Could this process continue indefinitely? Its possible, but only if the demand for dollars continues to rise annually. As long as people want dollars in greater and greater amounts, we could continue to expand our debt into infinity. But what happens if demand for the dollar falls, or disappears entirely? The massive liabilities we have already accrued will no longer have the crutch of perpetual Treasury investment. We no longer would receive the busloads of foreign capital we need to continue functioning. The system we have staked the future of our culture on would disintegrate.
Anyone who uses common sense would easily conclude that it is highly unreasonable if not outlandish to expect that other countries will continue to pump more and more money every year into our very unstable system. Even if Treasury bond investment simply plateaued, remaining steady for years, we would still be crushed under the weight of our debt obligations. As our government expands, and our wars expand, so do our costs, and our interest payments. Eventually, every undisciplined debtor hits a state of critical mass; a point at which he runs out of options in extending his ability to outrun bankruptcy. We are seeing this right now in the U.S., most prominently in municipal debt in states such as California and Illinois. These are not just “local problems”. The growing insolvency in states is a direct reflection of the growing insolvency in the Federal Government.
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  1. Yes the indicators are certainly in place for a huge collapse. Of course those of us who have been fans of this blog and live in reality have known this for years. Apparently the govt run MSN is beginning to announce to the sheeple slaves we might be in trouble.

    What will the yuppies do when they have their mac mansions foreclosed on, their Lexus's towed away for lack of payment? Probably nothing...

    Time is very short, this guy who wrote this article says in the next 6 months...

  2. Get out of US bonds ASAP, the redemption rules could change at any time or taxes on redemptions could be changed to discourage redemptions by uS citizens. The Gov is more broke than anyone in history has ever been.
    It may be an act of anti-patroitism to redeem your bonds in the future, cesh them in NOW.

  3. What we are witnessing is a total collapse of the USA, and our way of life, and its all due to corporate greed! The crazy thing about it corporate America has committed suicide and treason. The American people have no $$ to buy the inflated price goods coming from China or elsewhere, because all the middle class jobs are pretty much gone! All we have left is a bunch of low paying no benefits fast food, Wal-mart, dollar store type places to work. The Manufacturing sector (Steel, Automotive, Plastics, Electronics) that made this country great are gone! Even the Telecommunication, and customer service jobs are gone.

    The System is going down fast, the dollar can't be prompt up for to much longer, Do any of you people wonder why they're so many "We Buy Gold" shoppes? They're everywhere the Gov. knows the dollar days are limited, and the country needs GOLD. Theses shoppes are undercover operations ran by the Gov. to get as much gold as possible from jewelry, coins, etc..

    We'll never leave the middle east, because if we can't buy what we need with our dollars, or we don't have enough gold, we're going to take it! WWIII.

    To all you Tea Party people Obama didn't create this mess, he just inherited the mess from years of Regan type polices, you wanted free market you got.

    To bad we didn't listen to Ross Parot, remember the little man the media labeled crazy well he was right!

  4. 9:18 Yes ... Ross Perot may have been the real deal and is the only one we saw who tried to use 30 minute TV spots to educate people.

    Do not just get silver and gold but also have food, water, guns, etc... Make sure to have some friends and relatives that work with each other.

  5. Ross Parot stance on the issues! Not so crazy now!

  6. Hey did ya see one of our trusted friends and allies from israel knifed up a bunch of collerdz.

  7. What about the 25th of August?!


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