Welp, when this first got published, it was over on TBP and I read it then.
I read it again just now. Twice.
WARNING: WALL OF TEXT/LONG POST.
1) Devaluation: Devaluation happens when a currency value is pegged to another at a fixed exchange rate, and the smaller currency inflates at a more rapid rate than the pegged currency causing an imbalance in demand which eventually causes the peg to be broken and a new fixed rate set. The dollar isn’t pegged to anything—it’s the standard. In a non-pegged system an informal devaluation can only occur if the dollar is being inflated at a much higher rate than other currencies. That isn’t happening because every other currency is inflating about the same rate proportional to their base as is the dollar. In fact, other currencies approve of US inflation, because it allows them to inflate their currency while maintaining the same relative exchange rate with the dollar.
Well, the USD is the world’s reserve currency, which was established under the Bretton Woods agreement back before the end of WWII.
The above point re: devaluation – is accurate insofar as the USD remains the world’s reserve currency.
But, what happens when it’s not? The Russians, the Chinese, Indians (Dot, not feather), etc, the BRICS nations, are already trading in their own currencies – or gold – and there have been rumbles from Russia concerning the rollout of a new gold-backed Ruble (the Russians being in partnership with the Chinese in this matter). If that happens, the USD could very well be dethroned as world’s reserve currency the same way the Pound Sterling was dethroned at the end of WWII.
If that happens… well, the only reason I can see that enables us to continue paying creditor nations (nations we owe) is because the USD is the world’s reserve currency. If we need to pay some -stan country elebenty bahundred billion dollars for something, well, the Fed just invents it with a few keystrokes. Easy peasey Japanesey…
But, if the USD is dethroned? Well, we can conjure up all the USD we want, but if nobody is accepting it as reserve currency, then it’s only good for being used inside the boundaries of the US. We’ll have to convert USD to whatever the new reserve currency is – at a phenomenal loss, probably, since the more dollars we print up devalues the rest – and then pay our debts with that.
3) Hyperinflation: Two things must be present for hyperinflation to happen. First, you must start with a relatively small money supply that can be expanded multiple times in a few years. The dollar base is so large, after having been inflated and spread around the world for so long that it literally can’t be inflated rapidly as compared to smaller currencies. The quantity of dollars in circulation is estimated at $200-300 trillion (not counting the huge non-monetized economy of derivatives, contracts and hedges perhaps as big as $500T). The FED could create $20T a year and it wouldn’t exceed 10% of the money in circulation (and they are only creating about $3T per year).
Second, a nation has to have some sort of indexing or automatic injection mechanism to put increasing quantities of money into the pockets of consumers so they can keep up with rising prices, otherwise the inflation kills stops economic growth—what we call “Stagflation.” We don’t have that, and what we do have (food stamps, unemployment compensation, Soc. Sec. etc) isn’t effectively indexed to inflation. Without the public’s ability to keep pace with inflation through automatic salary increases, as they did in Germany in 1936, the economy retracts when people can’t keep up, and spending decreases—again stopping hyperinflation and causing stagflation.
With regards to the first point, the Fed printed up trillions in order to bail out the banksters, not the average Joe. All that money was and is being held by the respective banks, and is being kept intentionally from hitting the streets – from putting it in the hands of Joe. If that were to happen, we would have Zimbabwe levels of hyperinflation. The Fed has lowered it’s interest rates to ZERO – but not for you. That’s just for the banks and the banksters on Wall Street, which is why we have such a ginormous bubble propping up Wall Street at the moment… zero interest rates is effectively free money.
You still get to pay an interest rate when you take out a loan. Interest in a savings account? BAHH-HAHHAHAHA!!!!
Point two? “Kills and stops economic growth”? The GPD was flatlined for the last two quarters and is currently at .9 percent for this quarter. The second point would only make sense if there were economic growth to kill in the first place.
Even with the accounting sleight of hand the Government bean counters apply to fool the rubes before they release the numbers, that’s still less than one percent growth of the economy. So, there’s that.
4) Loss of Reserve Status. This also can’t happen anytime soon since the dollar base is so much larger than any other currency. You’d have to print up probably 10 times the existing quantities of Euros to supplant the dollar and that would have devastating inflationary effects on the Eurozone. The same with the British Pound. No one would trust the Chinese Yuan because there’s no transparency there either. What about a IMF “special drawing rights” basket of currencies? —The same problem exists there as in the EU—there’s no way to control that basket of currencies unless you have a global government, which we don’t have—yet (thank goodness).
Already addressed. The above point (and I notice it went 1,3,4… no “2”… that’s right from the article), anyways, the above point is only loss of reserve currency status if we commit suicide and print up elebenty bahundred bazillion dollars and dump them on everyone. It does NOT address if the Russians roll out a new gold-backed, state-issued currency that completely blows the dollar out of the water. If they did that, people would drop the dollar like it was Fukushima radioactive… people invested in the dollar willingly. They can just as easily dump it just as willingly.
Subpoint to 4: Everyone keeps hyping how the BRICS nations are stopping their use of the dollar and forming alternate currency trading blocks, but all the nations in the BRICS except China represent less than 10% of the dollar markets—too small to sink the dollar. And, China can’t stop accepting dollars if she wants to sell to the US market. Besides, the US and Europe combined represent 75% of the dollar trade, and that isn’t going away at all.
Unless the Chinese decide they would rather rule in Hell than serve in Heaven. Don’t think for two seconds that they wouldn’t call in 10% of our toxic debt they hold if they thought they would assume world dominance. That would tank our economy and – coupled with the new Gold Ruble – would destroy us. Our economy would collapse from the weight of so much worthless paper.
Derivatives Collapse: If there is a real threat right now, it’s the huge derivatives and hedge fund bubble—trillions of dollars committed in contracts but almost without actual asset backing. No big paper investment happens today with CDS derivative insurance or hedging, and little of that can actually be paid to the beneficiary if a sufficient crisis develops. However, this mainly affects the huge speculative economy—and these have the most power to get a bailout from their fellows at the FED. Besides, the US controls all the regulatory agencies that have the power to declare a default—which has to happen before a derivative collapse can happen. Look what happened to the Greek default. Despite Greek bond investors having taken a 50% “haircut” (loss), the financial PTB in Europe and the US simple refused to declare it a default, and no derivative claims were allowed. Slick!
The derivatives and hedge bubble is currently sitting at 750 TRILLION dollars. To give you an idea of the scale of that, one trillion seconds ago, it was 30,000 B.C.
Yeah, look what happened when puny, 3rd rate Greece defaulted. The country burned, was damn near thrown into a revolution, the banks flat-out STOLE 50% of everyone’s money (by declaring depositors “investors” in the bank, giving the bank justification to steal their money) and it almost took down the EU. Our response was to Blue Falcon the Greeks in order to save ourselves and the EU.
From just puny Greece.
And, it needs to be said, the US Government has been holding a Star Chamber of sorts for the last 4 years, made up of the Federal Reserve, the GAO, the OPM, the Treasury Department, etc. Their goal is to figure out a way – legally – to steal your IRA’s, your savings, any liquid cash you might have in the bank. This isn’t “conspiracy theory” stuff. It is actually happening, as I write this.
The derivatives and hedge bubble blows, and there are no more sources of liquid cash to tap. Except people’s savings and their retirements. And they know it. And they will take it. Bank on it.
And if half of everyone in puny Greece got a 50% haircut – and it almost threw their country into revolution – what do you think will happen here as a result? People have nothing left to lose… because they have nothing left to lose.
Stock Market Collapse: There clearly is a huge bubble in equities now, mostly driven by the big banks and institutional investors that have easy access to near zero interest rate loans from the FED. They invest these funds in the speculative markets rather than the real economy because they can get easy returns of 10-15%. While I expect there could be a 20% fall in the stock markets, even that would not result in the collapse of the economy. Harry Dent and other deflationists fail to adequately account for the power of the FED to manipulate all of our markets, using the Plunge Protection Team, naked shorts, and outright hiding of certain transactions.
I am fully aware that this fiat money/debt/deficit spending model cannot go on forever, but the globalists who control this nation and both political parties have the power to postpone the inevitable collapse of money for a lot longer than the collapse pundits realize. One of their main tactics has been to artificially lower interest rates to near zero to stave off the final day of debt reckoning when there isn’t enough budget money to pay the interest on the national debt.
Except that the interest rates are already zero because of the events of 2000 and 2008. Not “near” zero. Actually zero.
What are they going to do when the bubble blows? Lower the interest rates to zero zero? Absolute zero? We-really-mean-it-this-time zero?
The Fed is a one-trick pony, and they did their trick already. They got nothing left.
In short, what I’m saying is that the FED can keep bailing things out for several more years without fear of collapse. Even in Europe, the FED keeps floating short term dollar loans to European banks to keep them solvent, and it isn’t resulting in hyperinflation.
Of course they do, but the dollar supply in circulation in Europe is always fluctuating. Dollars do wear out on occasion and are pulled from circulation. Once the banks have them, they turn them over to be destroyed. When they get “new” shiny dollars in return for the old, they just don’t issue as many of them, thereby controlling the amount of dollars in circulation on the streets… BUT! This has nothing to do with the loans being floated to insolvent banks over in the EU – hyperinflation depends largely on the worth of the currency in circulation and that is dictated by how much of the currency is in circulation – in people’s hands. Limit the amount in circulation, you limit inflation by default… but only to an extent.
The USD is only worth something because we say it’s worth something. Or rather, our Government goons do at the behest of the Fed. It has no intrinsic value at all. It doesn’t even really make good toilet paper (I know for a fact.. but don’t ask for details).
The one thing this article does not address is people’s faith in the currency.
Lose that, then the dollar is dead, no matter how much you print or what you do… it only hinges on people’s belief in that it’s worth something…
The wicked flee when none pursueth..." - Proverbs 28:1