In response to InyoKern’s letter: The title of this discussion thread and the original text that went with it could just as well have been written by any of the well-scripted talking heads on mainstream F-TV (financial television). My initial inclination is to be diplomatic, but considering the exceptional economic times we are currently witnessing, I say, “Balderdash!”
I could reasonably conclude that the majority of the readers of “Survivalblog” are more apt to follow unconventional economic sages such as Jim Sinclair, Jim Willie, Jim Rogers, Bob Chapman, or Peter Schiff as opposed to the well-orchestrated financial propaganda of CNBC, MSNBC, CNN, “FAUX” News, or any of the formerly-relevant “major” networks that spin financial news in the adoring spirit of the CIA’s “Operation Mockingbird” that originated in the 1950s.
As such, these “enlightened” readers will know that the fiat U.S. dollar is doomed along with its unconstitutional facilitator, the Federal Reserve – which, as the saying goes, “is as ‘Federal’ as FedEx”.
Coincidentally, Rep. Ron Paul’s bill to audit the Fed has reportedly garnered 300 co-sponsors in the House of Representatives. The Federal Reserve’s days are numbered and it too will go the way of the “Edsel” along with its monopoly-money-clone, the U.S. dollar.
The recent clues to the dollar’s demise – sooner rather than later – are so numerous and widespread that one would have to be locked in solitary confinement in a maximum security prison to be oblivious to them.
The dollar has dropped from 89.49 to under 76 on the USDX within the last 12 months; gold is at record nominal highs in the $1,060 range; China is dumping dollars for tangible commodities at an alarming pace; Countries are making deals to trade goods and services to avoid utilizing dollars in their international transactions; The dollar is the international “carry trade” currency of choice now which is very dollar negative; The LBMA (London Bullion Market Association) and the U.S.-based COMEX are both in immediate danger of technical default due to lack of physical metals inventory for settlement of contracts that demand physical bullion; the Federal Reserve is monetizing U.S. Treasury debt sales via printing currency out of thin air to purchase foreign central banks’ agency bonds to enable those foreign central banks to use the proceeds to purchase Treasuries…and on and on and on.
The readers who have known nothing but the strength and security of the U.S. dollar for their entire lives and cannot accept the fact that a currency change of epic proportions is coming will have a rude awakening in the form of a lowered standard of living and reduced purchasing power – especially those on fixed incomes. The fact that we are talking about the death of a world reserve currency makes the problem exponential in nature.
The days of the world’s workers laboring all day for “a song and a dance” so that spoiled Americans can have access to cheap goods financed by the savings of the world are coming to a rapid and bone-jarring end. We have squandered our wealth and the creditors are lining up for the yard sale – and they’re bringing our increasingly-worthless dollars with them to buy up our infrastructure.
Got gold? (or silver?, or platinum?, etc.) The answer to those questions may well determine how you answer the question, “Got milk?”, in the future. Signed, – RB
Jim,
InyoKern is a real optimist, like so many of your readers. Many countries, such as those in the Middle East, have been in financial trouble, and are selling some of their holdings of all kinds, including dollars. Also, the US stock market is quite small compared to the bond market, where the real action is. And I don’t believe Putin’s trip was simply about being happy oil exporters.
His analysis below seems really off-base to me:
“And the Japanese, the other big holder of Dollars? We feed Japan with our rice, our Kobe beef (a special breed of cattle raised here in California and shipped across the ocean), and they buy our bonds because the national bank system of Japan is less than effective. Japan is also occupied by US bases since Japan is unable, legally, to more than defend itself within its own borders. Threats by North Korea means we, as their allies, are their defense abroad from a real and determined foe. A hundred million Japanese can’t afford to dump the Dollar.”
For one thing, an aging Japan is going to need to sell dollars to pay for pensions and medical care. For another, saying that the Japanese buy American bonds because the US banking system is in better shape is dubious. The Japanese have been in a “marriage” with the US, and that’s why they are forced to buy American beef, even though there is strong resentment about not buying from a country where they test for diseases better, such as Australia. The trouble is that the husband has had a secret gambling habit, and was actually laid off from his good job a few years ago and has been working part-time and living off credit cards. The wife just found out, and she’s letting the neighbors in Korea and China know some of the dirty laundry. Regards, – P.L.
JWR Replies: I agree that InyoKern is overly optimistic, but part of his premise is valid. In essence, the problem with US Dollars is that there are too many of them in circulation. And the problem for foreign holders of US Dollars is that they are holding too many of them, all at once. They cannot dump dollars rapidly, or the value of the dollar will collapse overnight, leaving them with nothing but kindling. (Or the electronic equivalent thereof.) Wise investors have been quietly getting out of dollars and into tangible commodities for several years. I expect this trend to continue for the foreseeable future. Interest rate inequities will perpetuate a Dollar Carry Trade that will be an even bigger market than the Yen Carry Trade that has been played successfully by currency speculators for the past two decades.
In the final analysis, yes, the US Dollar is doomed. Protect yourself by minimizing your dollar-denominated investments, and parlay the proceeds into useful tangibles like silver, gold, productive farm or ranch land, guns, and ammunition. The timing of the dollar’s decline and eventual collapse is very difficult to predict. But it is better to be a year early than a day late. Get out of your Dollar-denominated investments!