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Here Is Why The Fed Needs To Cut The Dollar In Half Over The Next 14 Years
Just in case you thought Tim Geithner was telling the truth about desiring a strong dollar, here is an opinion by Jim Rickards on why the US is getting increasingly wrapped up in its stock market bubble, middle class and imports be damned, and why the dollar's value will get cut in half in the near future.
h/t Ian
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If they do so slowly, everyone will flee the dollar. Everyone. The only way to pull it off will be quick mode cut of 50%+. Then it will be too late to get your _____.
el arian from pimco said the same thing the other day to CNBC hosts. the problem is they want an orderly decline of the dollar not a plummet.
Also they have to convince other countries that conspicuous consumption is beneficial, to which i say good luck.
Not true. This argument is bunk due to the Triffin Paradox. Once a single nation's currency becomes the reserve currency, it must spend more than it saves. This is what so many miss about bashing the U.S. consumer culture, it is a necessity due to the closing of the gold window.
The U.S. is the world's money supplier. The only way for foreigners to get dollars is for the U.S. to invest overseas, hold foreign currency, or consume foreign made goods. No matter what path is chosen, massive imbalances will develop in the global system. (There is the solution of empire. If the U.S. started absorbing nations, or they dollarized their economies and harmonized economic, tax, regulatory laws with the U.S., the problem could be averted.)
Under a gold standard, no nation needs to run a persistent deficit or surplus, in fact it is impossible as long as they don't go off the standard. Gold will flow in and out in response to trade flows, and vice versa, holding international balances in a equilibrium range.
The idea that SDRs are a solution is nuts. The governments of the world obviously want to use SDRs because it puts them in control of the money. But it's the same solution as the creation of the Fed, it kicks the inherent failures of the system up a level in order to delay reform. And as Rickards points out, the U.S. will lose its ability to operate in the world.
Under gold, only the U.S. government loses freedom. The people are as free as ever, though the welfare-warfare folks may dislike the restricted options for government. Under an SDR standard, the U.S. government retains some currency control, but under the control of foreign governments. It will reduce freedom.
Going to do some weekend thinking Ragnar ...
Thanks for the box of 38's.
This guy sounds smart, but what he is saying is absolute madness. Devaluing the dollar cannot help future obligations, they will just get bigger and more burdensome. The most significant dollar obligations are in the future; past obligations pale in comparison. The only true solution (short of default and WWIII) is deflation which would be accompanied by long-term gradual dollar appreciation. And I just cannot seen how the SDR, or gold, can replace the dollar. In spite of the apparent 'hate-fest' surrounding the dollar, it will likely appreciate, not depreciate, in the near and mid term. Longer term is just too difficult to anticipate.
I don't think he advocates this. He is just predicting it, and I agree, they will devalue. Though to "devalue" is somewhat tricky since the value to begin with is "zero". So what do they devalue against? What it means in debt monetization, pure and simple.
I didn't mean to imply that this is what he advocates. But I think he speculates and presumes far too much on such little concrete information.
Great post. SDR's are nothing but an attempt to completely globalize the savings based eastern economies into an illusionary debt based system.
SDR's are as NUTTY as nutty gets. It's divorcing every economy from itself and putting everybody else in control which will eventually be slippery sloped to a completely divorced global banking system that nobody can revolt from as it structures co-dependency into the global sphere. Nobody will end up with the farming or factory or food or enegry resources it needs to be independant. It'll be chess moved into as complete co-dependancy as it can achieve.
Theoretically they can cut the dollar in half every 14 years forever. San Fran Fed has probably devoted countless hours of time and money to researching this strategy. Trial run of said strategy currently undergoing implementation. Success of the program will result in a published paper that 14 people will read.
Spot on!!!
- Milton Friendman's Ghost
middle class? what's that?
According to MSN you can be living in a clay hut with no running water, and as long as your survival needs are met and you have a little extra for "wants" then you qualify.
Redefining our way to victory.
I don't buy the argument. Devaluing your currency only solves a debt problem if you don't layer new debt on the old debt faster than you devalue the old debt. If you have 60 trillion in unfunded liability, halving your currency only reduces your debt to 30 trillion AFTER you have borrowed the money. If you devalue before you borrow the money, you just have to borrow twice as much, and THAT at a higher interest rate.
Edit: And, once the dollar isn't the world's reserve currency, will the US still be able to borrow in dollars? If not, the decline in the currency will crush your old debt, not deflate it.
Chicago eliminated in the first round
OK Ben, the world just gave the US the proverbial Olympic middle finger. You can let go now.
I am sooooooooo surprised.
The problem is not that we need a strong middle-class. It's It's that we need the US middle class to BE strong. And it is not happening. Dope, alcohol, left wing ideology, "do your own thing" , gangsta rap, atheism rules the day.
Yeah, atheism is the problem. (Rolling eyes emoticon, anyone?)
Religion breeds obedience to arbitrary rule. The money masters and their entrenched political allies rely on such unquestioning devotion.
I agree, the gangsta rap killed it! ;-)
"Dope, alcohol, left wing ideology, "do your own thing" , gangsta rap, atheism..."
...right wing nitwits........
Memories of Liberty Street as a child occupy my mind; it was the happiest place on earth. It was a step back into Colonial America, where Glassblowers and The Forge were turning out products for Paul Revere’s Silver Shoppe, and the printing press was cranking out copies of the “Boston Observer”. The concept of American values as laid out by Walt Disney was truly influential on my young life and the protection of these values would become my life passion.
The history of the US was built around the promotion of civilization at all costs. The idea of Liberty, the right to act according to our own will, provided justification to this history.
Our liberties demand a high price from others. From the native peoples that walked these lands before us, to the Mexican nation that fought against our invasion, the expansion of civilization and the promotion of our liberties have conquered all.
As I approach the building this morning, I pause to read the words I have seen hundreds of times before; Chartered 1914 – Erected 1922. The history behind my profession comes into focus as the concepts of youth fade away to the greed of the present.
The Federal Reserve, with names like Hamlin, Crissinger, Volcker, Greenspan and now myself have stood to protect the US at any cost. We hide in our marble towers and provide plausible denial to Washington as their public roles dictate. The costs have become unbearable, however the game must continue. The casualties are mounting; Bear Stearns, Lehman Brothers and JPMorgan were just the beginning as we approach the end.
In the first floor lobby, the iron clock that has always adorned the wall appears tired. Its hands fashioned many years ago, perhaps at the Forge of my youth, stand motionless only marking time in scales of old. Today, time is marked in milliseconds; fortunes are won and lost before these old iron hands move to their next station. The rush of life has been lost by the rush of time. Quietly, time marches on but I feel the end of liberty is near.
The board room was dimly lit or perhaps my eyes hadn’t fully adjusted from the morning sun.. The closed doors or this room are designed to protect the secrets discussed but only provide an advantage to a privileged few. As I sit half listening to the morning updates, I catch a glimpse of the chandelier reflecting in the walnut table with burl inlay. The inlay seal of the Federal Reserve wrapped around thirteen stars. I find it ironic that I am the fourteenth chairmen and the thirteen stars echo that we have over extended our stay.
It is still unclear to me what the future will hold however 33 Liberty Street and the deceit of this address have no place on the Liberty Street of my youth.
Ben
I think what you need to understand is that those "memories of Liberty Street" are from an idealized vignette of colonial life, a Potemkin Village that never really existed. I despise today's soft corporo-fascism as much as the next person, but I am unwilling to fully buy the narrative being laid down here and elsewhere that the world is being controlled by . I think we're at a transitional phase and that a new, less centralized world is emerging and that the powers that be are terrified of it because they naturally fear what they do not understand.
If you live in the first world, there is absolutely nothing to fear from these failures. Nothing at all. The evidence? We, as regular people, are almost fully briefed on what is happening. This is the first time in history that such is the case. The world of the ruthless has become almost completely transparent. Sunlight kills vampires.
The 2% below the top 1% of income earners ?
Cut in Half -- Does that make Jim Rickard a pessimist or optimist? I vote latter.
He sees the dollar half full
Optimist
Why does Ben and Timmy hate in no particular order?
Savers
Old people
Main street
Non speculators
Future generations who had no say in assuming all this debt
Pigpen, I love your comments but you're asking a question of morality when in their minds it doesn't apply at all.
They don't hate "Savers, Old People, Main street, Non speculators and Future generations who had no say in assuming all this debt" in the same way you don't hate that ant you just stepped on.
All those people you mentioned (of which I am one) are simply in their way. When you don't value something, it's very easy to destroy it without a second thought.
Do you ask yourself this type of moral question after stepping on that ant? If you do, good for you. But most people would not and would think you silly (or worse) for asking.
Sad as it is, you are correct CD. We are merely fodder. I am sure Timmay and gang don't waste a millesecond of thought on us, the people who pay the bills and fuel the US economic engine.
"It's good to be the King".
You're da man, pigpen.
This has been the plan for some time. People reflect on Weimer Republic's hyperinflation as a mistake but it wasn't. The easiest way to get rid of a debt you can't pay is to create hyperinflate it to nothing.
That only works if you stop borrowing. What are the odds of that happening?
Game on when lenders stop lending, then full monetization of everything. Non stop default by fiat manipulation. New currency. Start with new backing to retrain confidence i.e. commercial & residential backed currency or, gasp, AU.
Agreed. The US lacks a manufacturing and exporting base. How it is going to transition from being the reserve currency... no idea. If the IMF is going to slowly take over from the USD... tough times ahead.
Study the Weimar Republic, most common knowldege histroy has been manipulated to fool us - it was shorting of their currency by others and banks that did them in, not govt printing
Yes didn't the Germans have treasury notes as opposed to a federal reserve system? The banking oligarchs and powers to be hated the idea of Germany not having a central bank.
History is much better from the vanquished perspective.
Cheers,
Pigpen
I'm having a hard time understanding what the dollar will depreciate against when nearly all assets seem overpriced and people continue to lose jobs.
For one close by, just look at the Canadian dollar (CAD)
It was only a year or two ago that a single USD was
worth $1.35 CAD, now it's $1.08. Go back a few more
years and USD/CAD was $1.40, maybe even $1.50!
Since the US imports most of its oil and natural gas from
Canada, this is not good for US consumers.
http://www.eia.doe.gov/pub/oil_gas/petroleum/data_publications/company_l...
The same is true for EUR/USD, which means travel to
Europe will be very very expensive for anyone from the
US. On the other hand, Europeans will be able to come
to the US and purchase everything for what amounts
to a 50% discount.
"look at the Canadian dollar (CAD)
It was only a year or two ago that a single USD was
worth $1.35 CAD, now it's $1.08"
fx-What's the best way to "lifeboat" dollars into Canada?
and to bam Man-"most asset prices will rise -- which is "good" for those who already own them, but "not-so-good" for those that don't"
Karl Denninger has speculated that assets will be disgorged willy nilly, as in the great depression, for pennies on the dollar, in a mad rush for scarce cash.
which assets do you have in mind?
The dollar will continue to depreciate against everything with REAL value. That excludes other poorly managed fiat currencies of course.
This means higher prices for everything (except other garbage fiat currencies) and translates into a much lower standard of living for the unfortunate inhabitants of "dollar land".
And yeah, most asset prices will rise -- which is "good" for those who already own them, but "not-so-good" for those that don't, because their inflated prices will make them completely unaffordable for most.
The S&P is already trading at 129x ttm earnings. Maybe commodities rise. Domestic bonds won't. Like someone else said in this post, even if we devalue 10:1, the gov't will only want to borrow 10x as much. IMO the dollar value isn't the problem, it's the balance of payments.
+100. Bingo. It doesn't matter whether:
a) you earn 100 fiatscos and spend 200 fiatscos, or
b) you earn 100000 fiatscos and spend 200000 fiatscos.
In the end you will be either:
a) -100 fiatscos with a ratio of roughly 1 fiatsco/1 oz useless metal.
b) -100000 fiatscos with a ratio of roughly .001 fiatsco/1 oz useless metal.
Of course, along the way the rest of the world will prefer useless metal or useful gooey black liquid in payment instead of your crappy fiatsco.
Who'd have thought the printing press would be the greatest invention of last millennium and reinvention of this millennium. Gutenberg would be proud. Charles too.
hey mr mao, gutenberg did not invent the printing press; the diamond sutra dated to 800 AD was discovered by Sir Aurel Stein in Dunhuang China at the turn of the century. The printing press was invented in China well before 800 AD. Your glorious revolution didn't teach that?
There are too many good morsels here - wow!!!
The cat's out of the bag - the USD ain't worth ^*#@ per the FED.
We will replace one ponzi scheme (USD world reserve currency) with another (IMF-SDR's).
Gold is good but you have a battle with the CB's suppressing its price in order to gradually phase us into various stages of becoming a third world banana republic.
and so forth...
Gold is good but.....You had better be holding physical gold because there is so much paper floating that when the $hit hits the fan there won't be enough physical to cover all the paper!!!
I don't think there ever was enough to cover all the paper - nor would there ever be.
Gold doesn't have any more intrinsic value as a currency than wood/cloth fibers printed with faces of dead people, other than it's conductive properties for electronics.
We will always trade one fledgling standard for another because pragmatically there is no such thing as a true store of value.
Skills and education are probably the only equitable stores of value. Many cannot be taken in a manner in which one would mourn their loss.
And the only education which leads to skills that matter ultimately are:
the ability to take life, liberty and happiness; or
the ability to give life, liberty, and happiness. (If you choose one accepted point of view.)
One can take this all the way to to the theological level.
However practically speaking, an accomplished military professional will be rich in skills in a TEOTWAWKI scenario, as will surgeon. Practically speaking if you are not of use and service are f'-ed in the worst case.
The point is given your assets, education, skills and beliefs what is the best deployemnt of each given the probable state of the world, and your purpose.
The wise one IMHO would choose Gold, Wisdom, Health, and God. Then one can go through life with the confidence of a Christian with four aces, no matter what happens.
"They inflate the dollar in order to support the banks."
Breaking News.....The center of the universe has a different black hole than previously thought.
"Even the central banks are not bigger than the markets."
That quote pretty much sums up my view. The galaxy will overwhelm that central black hole by destroying the singularity which is the Fed.
It's core-periphery. No matter how well organized the core is the periphery will just do all the things that people do when they are controlled and abused.
Transform the core. - Transformation strategy
Ignore the core be self reliant, create blackmarkets. - You can't use me If i'm detached from you.
Karmic Control- Brutal unrelenting assault on the cores inadequacies and weaknesses in a crushing intellectual and emotional assault. Think billions of scorpio chics slashing the tires on your bentley, smashing it's windshield and painting you have a small penis on it with lipstick.- Control Strategy.
How could we lose Chicago!? Ahh! Unbelievable. Something went wrong. Maybe Olympic Committee doesn't appreciate the value of the IOUS bribe payments?
Is the almighty dollar, now that it wears the shadow cloak of fiat, to go on forever-- durable, manipulable and invincible? Afterall, its very existence on earth is now in the care of mere mortals and, in this case, the emphasis must be placed on the word “mere.”
In that prior to and during most of the 1800s, international trade was denominated in terms of currencies that represented weights of gold, it has only been since the 1944 meeting in Bretton Woods that the world’s then most prominent socialists – John Maynard Keynes and Assistant Secretary of the U.S. Treasury Harry Dexter White (a member of a Communist espionage ring in Washington who became the first Executive Director for the United States at the IMF)—established the IMF and the World Bank as mechanisms for eliminating gold from finance. I am not so sure that this short time table has established the Fed’s paper note as so invincible that it can withstand devaluation ad infinitum at zero interest rates at home and still dominate as a global currency. In fact, I think Bernanke long ago lost the handle on this economic mess--the first of its kind in mankind’s history.
The goal, of course, is to continue to use money power to create and extinguish the nation’s money supply against the public for the personal gain of those who control it. The problem, of course, is the nation was brought to its knees too early for total manipulability and is not quite ready to totally submit to outside control. I shudder to think of the wealth already transferred to the oligarchs--without one outcry from the Congress. The collateral damage is all about us—millions of jobless Americans and college graduates with bleak employment outlooks, millions of famlilies hit with negative interest rates on their savings of past earnings, millions of retirees trying to subsist on an annual return of $1500 on a $100,000 IRA while paying exorbitant prices for gasoline, heating fuel, food, property and sales taxes, telephone, house/car/Medicare/Drug/Supplemental insurance premiums, services, credit card debt…using their homes as reverse mortgage collateral, forced to give up their children’s inheritance to the bankers.
The idea behind removing the discipline of gold (stable value) from the dollar, of course, was so that governments could create money out of nothing without their currencies dropping in value on world markets, all inflating together at the same rate—never mind the devastation at home. But things never do work out too well without at least a little discipline. Capital for the IMF and World Bank was to come from the industrialized nations with the U.S. putting up the seed corn, but the boyz got greedy and ate most of it. They sold off the industrial base before they had totally deprived “the people of all their property…on the continent their fathers conquered.” And, now, revolution is in the air.
Keyne’s dream, of course, was for the IMF to gradually evolve into a central bank for the world, with the World Bank serving as its lending arm, as the engine for transferring the wealth from the industrialized nations to the underdeveloped nations.
His ultimate goal, however, the building of world socialism, seems to have hit a snag. It not only lowered the economic level of the donating countries, with much of the money simply disappearing down the drain of politcal corruption and into the deep pockets of the investment bankers, but it has about knocked out the U.S. economy—before schedule. And now we have former Fed chair Paul Volcker breaking the sad news to the sheeple that in the “balanced world” he and the masters have envisioned, “all labor is created equal” and under the present leveling course we must accept the Fed’s downward inflationary pressure on our U.S. wages until we are reduced to the world’s common denominator plantation wage. We are labor, of course; they are management, where the common denominator, say at Goldman Sachs, is $700,000 a year and up.
As has been mentioned on this blog not more than three days ago, these men are conducting no less than the murder of a nation. But IMO, as the nation goes, so goes the dollar.
> prices for gasoline, heating fuel, food, property
> and sales taxes, telephone, house/car/Medicare
> /Drug/Supplemental insurance premiums, services,
> credit card debt
as deflation really takes hold, the prices for all these will fall. review the Japanese experience, 1990 to now.
when the average American consumer figures out what the average Japanese consumer figured out by 1995-1996, that saving at 0% was a great deal when prices for most things fell year-over-year by 5%-6%, it will be an interesting day in the neighborhood.
Hope so. What a comeuppance it would be to TPTB! Voters on Zero Hedge certainly are in the deflation camp—and the economic IQ here certainly is in the top of the top centile.
Actually I think we all agreed on something like Hyperstagdisinflation a couple of weeks ago.
And they don't discriminate against us in the low of the low centiles either.
so it sounds as if there's still a diconnect between the outcomes? Or is it possible to get deflation when the dollar been flushed down the toilet?
I believe the issue not either/or, but more if when each will come.
Personally, I am inclined to say deflation first, followed by nasty, nasty inflation.
DXY has fallen 17% since March highs of 92. Annualize that - they are way ahead of schedule on the devaluation express.
Cheers,
Pigpen
All of us tin hats are having our day in the sun, our "see I told you" moment. The Fed kills the USD and sets the stage for the IMF (the same players) to replace the currency they destroyed in order to create another so they can further consolidate their power.
Barry-O the little messiah is just a pawn, who are the next pawns waiting in the wings??
Non sequitor - but glad Obama and Oprah and Chicago didn't win Olympic bid. I hate celebrities.
I know I am jealous as a former child star I harbor tons of resentment - I was big in the 70's.
Cheers,
Pigpen
maybe they know something - 2016 is a long way off
Yes, the USA as we now know it most likely will no longer exist by 2016 and the IOC realizes this. "Sorry Chicago, but we can't be holding Olympic games in what is likely to be a gigantic, anarchic urban wasteland by 2016."
Celebrity? What is that?
Oh, yeah! I remember. It is another SCHUMK with a job, but an EGO to boot.
I do not adhere to the term CELEBRITY!
It also applies to any and all politicians, including the President, as ALL are just SCHUMKS with a JOB!
Won't happen. There will be revolution in the USA before the Fed is allowed to destroy the currency, as much as they would like to.
Deflation.
I hear you, but they've already had a practice run since 2002 to "test" the people's reactions....and how many times have you heard Bernanke say to Ron Paul, "It doesn't matter if you stay at home"....?? The more times that "line" gets "Fed" to the lemmings, the more will believe it.....unfortunately....
When you're down 96% since 1913, what's another 50% of 4 cents anyway??....;>)
http://tfc-charts.w2d.com/charts/USM.GIF
This also explains why they control the value of gold. Gold is a hedge against inflation and its value is a representation of inflation. If you can control the value of gold, you control people's perception of the truth of the existance of inflation.
A graph of DXY vs SPY would be quite amusing this morning - the R^2 has to be close to 1.
Yup. A trademark of a "Banana Republic" stockmarket. Ala Weimar Germany, Argentina, Brazil, Mexico, Russia, Zimbabwe and a host of other socio-economic basketcases. Welcome to the "club" America.
In another word,if you are a responsible person,and you don't have debt,and a little bit of saving,then you are doomed. You either throw your money to the wolfs of Wall St.and pray evvry day that they don't steal it all,or you keep it in the bank and pray every day that the fed stops devaluing the dollar..........
Or you buy commodities and hope their value increases, relative to the fiat currency, and that it isn't being manipulated into underperformaning.
it's fascinating to see an outlet like CNBC giving any time whatsoever to talk like this
don't recall them giving much serious consideration to this sort of thing before last year.
It's fascinating that anyone reading ZH is fascinated by anything the douches at CNBC do...
It's fascinating that anyone (period) is fascinated by anthing those douches at CNBC do...
FATAL ERROR: Process Terminated
EXCEPTION 2009: [INFINITE RECURSION DETECTED] See stack trace for details.
This event eill be reported to uber_ops@skynet.net.
But according to Mish there will still be deflation because you will not be able to get a credit card.
Subdued emotional reaction to the market today from the dream team at cnbc is amusing. How to put a positve spin on todays situation ?
Saw this also on JSMineset.com earlier this week.
Only one solution remains....
"While you were dragging to your sacrificial altars the men of justice, of independence, of reason, of wealth, of self-esteem -- I beat you to it, I reached them first. I told them the nature of the game you were playing and the nature of that moral code of yours, which they had been too innocently generous to grasp. I showed them the way to live by another morality-mine. It is mine that they chose to follow.
All the men who have vanished, the men you hated, yet dreaded to lose, it is I who have taken them away from you. Do not attempt to find us. We do not choose to be found. Do not cry that it is our duty to serve you. We do not recognize such duty. Do not cry that you need us. We do not consider need a claim. Do not cry that you own us. You don't. Do not beg us to return. We are on strike, we, the men of the mind.
We are on strike against self-immolation. We are on strike against the creed of unearned rewards and unrewarded duties. We are on strike against the dogma that the pursuit of one's happiness is evil. We are on strike against the doctrine that life is guilt.
There is a difference between our strike and all those you've practiced for centuries: our strike consists, not of making demands, but of granting them. We are evil, according to your morality. We have chosen not to harm you any longer. We are useless, according to your economics. We have chosen not to exploit you any longer. We are dangerous and to be shackled, according to your politics. We have chosen not to endanger you, nor to wear the shackles any longer. We are only an illusion, according to your philosophy. We have chosen not to blind you any longer and have left you free to face reality -- the reality you wanted, the world as you see it now, a world without mind." -- John Galt, Atlas Shrugged 1957
Excellent post.
I might add the following quote from the Money Speech:
"Whenever destroyers appear among men, they start by destroying money, for money is men's protection and the base of a moral existence. Destroyers seize gold and leave to its owners a counterfeit pile of paper. This kills all objective standards and delivers men into the arbitrary power of an arbitrary setter of values. Gold was an objective value, an equivalent of wealth produced. Paper is a mortgage on wealth that does not exist, backed by a gun aimed at those who are expected to produce it. Paper is a check drawn by legal looters upon an account which is not theirs: upon the virtue of the victims. Watch for the day when it bounces, marked: 'Account overdrawn.'" -- Ayn Rand, Atlas Shrugged, p.413 (35th anniversary ed.)
I think we have already seen America's checks bounce; the Fed is reduced to buying bonds with printed money. Look for the dollar to be replaced with an international currency within 10 years at the latest. I'm basing my estimate on what happened in France (1789-1799). Andrew Dickson White did a great job writing about that in "Fiat Money Inflation in France". (The parallels are disturbingly similar - as they are with Atlas)
Does Richards even listen to himself? He says that the dollar is effectively going to be at least cut in half over the next 14 years and that gold will likely double in value but he only advises his clients to put 10% in gold because central bankers hate gold... but then goes on to say that the Market is bigger than central bankers.
So basically gold will win out in the end...but don't invest in it...lol.
Shargash said: "Edit: And, once the dollar isn't the world's reserve currency, will the US still be able to borrow in dollars? If not, the decline in the currency will crush your old debt, not deflate it."
This is true - unless you simply repudiate your debt. Having the baddest military on the planet enables one to do that, although it runs on oil obtained largely overseas (unless we open Alaska, the coasts and the oil shale fields, and quickly), and that presents all kinds of problems. However, the US could more easily repudiate debts than, say, your average banana republic. Of course, this would have horrendous repercussions...but, then again, so does a hyperinflation. Either way, the cost of borrowing in the future skyrockets, as no one trusts you - they want collateral, in hand, or no oil, food, machine tools, whatever.
"Inflation is what the Fed does best."
Now there's an understatement.
"If you had a nickel and three pennies in your hand that's the value of the dollar relative to 1913 when the Fed was created."
Yes, I think Mr. Rickards is correct that the only political way out of this mess (for the gov) is inflation, but it will wreck our economy big time.
Someone posted this a while back, it's worth repeating (paraphrased):
"In 1970 my Silver Dollar bought me about about 4 gallons of gasoline. In 2009 my Silver Dollar buys me about 4 gallons of gasoline." My paper dollar, on the other hand, buys me about 1/3 gallon of gasoline in 2009.
I'll take the Silver Dollars please.
I don't think they can do it. I think the closer they get to zero, the harder it gets to inflate at all, especially smoothely. It's like a big cliff with no stairs, just some boulders half-way down. All they can do is drop a load and hope it lands somewhere on the boulders. They aint got no rope.
14 years? That's only 5% inflation. Surely, it can be argued that the true inflation rate prior to Oct. 08 was greater than 5%.
But the $60T figure presumes that the unfunded liabilities out there (SS, Medicare, ...) will come home to roost, when in fact they probably won't. The $48T or so that those programs represent will probably be cut by a third to a half as benefits simply must be reduced. The notion that retirement without sufficient savings doesn't necessitate poverty for the elderly will become a quaint notion.
Doesn't the importance of gold diminish if SDRs are adopted as a standard of valuation?
Th irony is that somehow the masses have been taught that the fed works in our best interests, when all it does is keep killing the spending power of the masses and try to make up for it in cheap credit. You need to foster savings which means higher interest rates. this increases spening power of the masses and helps economy. it is a sham system designed to make bankers better off at the expense of everyone else.
+1 1/2
This thread has had many intelligent comments. But, there is a disturbing element of whining entitlement that pops up again and again. People with net worth are upset because there is no decent-return investment that is guaranteed to be secure against all present and future possibilities (including dollar devaluation, inflation, deflation, too-low interest rates, too-high interest rates, asset bubbles, asset collapses, yadda yadda yadda).
If you want "liberty" and control over your own future, you're going to have to get out of all financial markets, stop trading assets, stop depending on banks, insurance companies, governments, employers, mortgage companies, international trade, mass-production and mass retailing.
As apparently the only person here who has actually lived by digging my own well, growing my own food, gathering my own wood, building my own shelter, and trading my labor directly for the goods I wanted from others, I can tell you that you freedom is available any time you want it. It's hard work, there's no safety net, no high-powered entertainment, and above all no one else to blame for your problems. But it's incredibly simple, completely satisfying, and very doable.
To avoid that hard work, boredom, and accountability you are free to engage in the world's fabulous labyrinth of work-play-strive for wealth that the urbanized financialized life offers, but please stop complaining that Oz is so complex, dangerous, and uncontrollable, and the Wizard is corrupt. That's in the nature of the beast, always has been, and you have always known that.
not really, grizzly adams.
No quite as "doable" as you say, but a shame it's not.
Giving up one's post-industrial, corporate dependent, mass consumer lifestyle for one more independent and less materialistic, is certainly possible for some of us, but getting the billions of people currently in cities "back to the land" is no longer viable. Not enough land or "wells" to be dug by hand anymore.
Of course, this will become a problem eventually for even those in cities, when water stops flowing out of their taps. Then the "price of gold" will truly be irrelevant.
Finally, someone has jumped right in to give us a clear solution to our problems. And named them. It’s Whining! Whining! Whining! Whining! If we could just stop whining, the skies would clear…
“People with net worth are upset because there is no decent-return investment that is guaranteed to be secure against all present and future possibilities (including dollar devaluation, inflation, deflation, too-low interest rates, too-high interest rates, asset bubbles, asset collapses, yadda yadda yadda).”
Congratulations! You just described the Fed.
Gold - $5000.00 ?
Rickards’ postulation is illogical. He implies the Fed and G20 are Austrian Economics (AE) theorists after all. They realize banking is a crooked game but want to perpetuate it by issuing SDR’s and decimating the dollar. If true, it does not follow that halving the dollar in 14 years is the answer, since the bulk of the 60 trillion (and more ongoing), will be issued after the dollars’ decline, achieving nothing. They would know that.
Further Fed and G20 AE's would have predicted the financial collapse. AE predicts that banks and Fed are running a Ponzi scheme that systemically builds in failure. Their vigilance to such an ongoing calamity would demand constructing a comparatively inexpensive model to estimate leverage risk and intervening when it got out of hand, which would have happened years ago. Besides railing against off Balance Sheet derivative risk over the years, making their model more difficult, AE would ignore wholesale inter-bank paper in liquidity and capital calculations since they are a lynchpin of AE Ponzi activity. In fact it is the refusal of banks to continue wholesale trading that triggers the collapse of the Ponzi scheme. It is interesting that the IMF is now considering Pigouvian taxes as a ‘fix’ to these heretofore ‘unseen’ risks, rather than ignoring them altogether as any AE would suggest.
Practical or not, AE would also be shouting loudly for fiscal restraint, knowing that the Ponzi scheme is ultimately unsustainable. AE’s would also be screaming that monetization is most insidiously regressive for American and the world’s poor, and would therefore be duty bound to mention it often. The Fed to my knowledge has never said such a thing. Lastly, Rickards’ explanation assumes a vast ‘conspiracy’ in the back rooms of government and private institutions, successfully kept secret for all these years. That is impossible; even the CIA can’t stop leaking.
It is much more likely that the prevailing theory is a monetarist one, and living in a practical world, the Fed and IMF mistakenly believe that despite deficits, continued injection really is the answer, if only they can come up with the correct regulation as counter measures. AE sees regulation as fingers in an increasingly leaky dike.
It is also popular to gnash one’s teeth about an imminent future where everyone flees the dollar bringing on apocalyptic American economic collapse. This argument hurts the sound money argument because it is also a distortion of reality. Here’s why. First, even in countries where garbage sorting is the prevalent middle class occupation, the American dollar is the main currency; it is pervasive and universally considered as gold COMPARATIVE to all other currencies which are even MORE unstable. Besides the Canadian economy, the G20 is more structurally bankrupt than even an Obama run USA. Second, many of the world currencies are pegged to the dollar. Therefore monetization effectively exports inflation to all those countries, dispersing the problem across the world and mitigating its effect in USA. Lastly, the whole underground economy of drugs, prostitution, etc., which I believe is larger than even economists’ most outlandish estimates, all runs on the American dollar. That is not easily changed. In summary, in a world without a gold standard, the American dollar remains the preferred currency even now, as it slowly makes the whole world poorer.
Have you guys seen this? (January 22, 2009, from MIT's "View from the Top" symposium: The Future of the Economy)
http://techtv.mit.edu/videos/2127-the-future-of-the-economy
If you don't have half an hour, then go to 13:50, in particular from 19:10, with the point that coincide with Jim's above being served at 22:00.
ES
I've put a lot of thought into this because I have savings to protect. In a devaluation event savings are trashed, as are lenders. Debtors get a free ride.
The US will NOT devalue quickly. I once thought so but it is impossible. Why? The Chinese would simply retaliate by confiscating US factories/property. Also, this would kill banks and be a huge gift to the typical over borrowed consumer. Therefore, the fed's only alternative is the slow death we have going on right now.
However if you still believe there will be a quick devaluation, your best store of value/defense is commodities. Also, borrow as much money as you can now because repaying it with inflated dollars would be a huge gift to you.