Comments on Market Skeptics: How big a deal is the loss of the dollar's reserve...

Yohay said... Very interesting and thorough p...

2009-10-02T10:32:36.253-07:00

Yohay said...

Very interesting and thorough piece.
Do you have any estimation about the timing of this collapse?
March 22, 2009 2:43 PM

Your reply...
The timing of collapse, is in the mid of the year 2012.

How severe and and it what ways would countries li...

2009-03-27T14:18:00.000-07:00

How severe and and it what ways would countries like Japan be hurt?

It is going to be the Biggest Deal.Dollar is still...

2009-03-25T19:43:00.000-07:00

It is going to be the Biggest Deal.Dollar is still the fuel for PAX AMERICANA.If it goes down,the geopolitical changes will be unforseen.This is not the Weimar Republic.We are talking about the United States of America.We are talking about The nuclear superpower and lots of advanced technology in the US armed forces.Humanity cannot afford a major crisis developing in the USA.Hell will brake loose.Bad or good,evil or not,the central administartion of the USA must remain intact from this crisis.What could be done though, is an international tribunal to bring in a global court all those financial manipulators who planned this global mess, parasiting the US for so many years.Capital punishment for all the traitor banksters and their political puppets.We are so sad loosing the American dream.We are so sad to see the American people fall victim to these few conspirators who hijacked the USA for their own lust of power.In a Democracy,there are no dead end roads. The Americans need at least a glastnost operation, like the Soviets did.There is a forgotten constitution hidden somewhere. And the criminals should get the full punishment for conspiring against the people of the USA, against the people of the world.JFK deserves this...

Again, I have deleted the posts about Jews. I do ...

2009-03-24T13:00:00.000-07:00

Again, I have deleted the posts about Jews. I do not want to bring relegion into this blog, and they had absolutely noting to this blog entry.

Well all the so-called consequences that the blogg...

2009-03-24T12:55:00.000-07:00

Well all the so-called consequences that the blogger just mentioned are things that have to come to pass in order forthe united states to be able to recover again and prosper with soudn money, they may not be #1 in the wrold, but they will be a major player in a multi-polar world. It's not healthy for any economy to have a fiat currency let alone have that fiat currency be the world reserve currency. As Jim Rogers say recessions & depression are good because they rid the ecomony of all excesses. These higher interest rates & hyperinflation & lower quelity of life is what US americasn have to face to make it throught the other side. Capitalims shoudl ahve folowed comunism collapse back in the 1990s and the world shodulahvebeen in an era of real prosperaty, but for a good 19 years the US treid preventing a recession & now we have a depression & we will have more hyperdepression. It1's like a guy or a gal not wanting to go to the washroom--even thought his body is filled--because he know if he goes the smell will be really abd so he trying as much as he can to aviod it. & it's catching up

I'm not worried, it's not there.

2009-03-24T10:14:00.000-07:00

I'm not worried, it's not there.

There hasn't been an audit of the gold that's supp...

2009-03-24T09:47:00.000-07:00

There hasn't been an audit of the gold that's supposed to be in Ft. Knox for decades. Why are so many people here so conident that it's still there?
Hasn't it been given to the Fed as collateral on the national debt?

Private Digital Gold Currency is a excellent solut...

2009-03-24T08:50:00.000-07:00

Private Digital Gold Currency is a excellent solution to a falling/failing US dollar. I pay most of my online bills each month with digital gold. You can protect the value of your saving with 100% gold backing and the digital units are divisible down to a thousandth of a cent so any amount can be paid. Any commodity backed money would work well as long as there is very good governance on the backing. Private digital gold is already in wide use and has been for over 10 years. www.GoldMoney.com, www.Pecunix.com and others. Try our monthly digital gold magazine for more info.http://www.dgcmagazine.com

Mark
editor@dgcmagazine.com
Skype IM 'digitalcurrency'

AS GOOD AS GOLD!I suspect China has studied the ec...

2009-03-24T02:50:00.000-07:00

AS GOOD AS GOLD!

I suspect China has studied the economic history of the West and has decided not to buy into a controlled economic demolition and war every fifty or sixty years since the South Sea bubble burst in the early 1700's.

If they back their currency with tangibles, very carefully join the currencies now in the 'Special Drawing Rights' (SDR) basket with the dollar, Euro, Pound and Yen ...

If they operate a federal or national reserve bank that is against the law to be privately owned ...

If they regulated their monetary systems and outlawed usury (compound interest) ...

... Why, Chinese money could be as good as gold!

the economic collapse will bring high unemployment...

2009-03-24T01:40:00.000-07:00

the economic collapse will bring high unemployment, and social and political unrest.This will give demagogues a chance to rise to power. This will be followed by world war three.
wakeup man

It won't happen though, will it. You article cont...

2009-03-24T01:35:00.000-07:00

It won't happen though, will it. You article contains a lot of interesting fact, but (and I'm a Marxist not a government shill) I've seen enough crises to know that goddammerung speculation hardly ever works out. The bastards always have some other trick up their sleeve, some unexpected event saves them or the 'opponents' are either too cowardly to challenge the status quo or get bought off in some way we haven't got knowledge of.
The only route to take is world wide worker revolution.
But you knew that already!

OK, the answer to this paper reserve issue are..CR...

2009-03-23T23:15:00.000-07:00

OK, the answer to this paper reserve issue are..CRNs, Commodity Reserve Notes. Use a trusted escrow agency maybe a bank to vet out the reserve units. Denominate the CRNs to a small amount with it redeemable against the sale of the reserve. For example, someone has 1,000,000 Metric Tons of Iron ore at 64% pure. The current value is $60 a metric ton. Issue metric Iron ore commodity reserve notes worth $60,000,000 at present time. One ton per unit. These notes can be used to develop and pay for the mine infrastructure and local development and as a local trade units to grocery stores, taxes and so on. This way we can create trillions of dollars of real backed reserve notes all over the world. Better than gold.

12) American spending patterns will change, the st...

2009-03-23T19:33:00.000-07:00

12) American spending patterns will change, the standard of living will drop and American labor will become cheaper relative to labor from other countries

13) Cheaper American labor and a devalued US dollar will make producing things in America viable once again

14) A resurgent more productive America with more real jobs will begin to reverse 1) - 12)

IQ testStep one: Be the only nation to drop nucle...

2009-03-23T17:26:00.000-07:00

IQ test

Step one: Be the only nation to drop nuclear weapons on a powerful, wily enemy

Step two: litter the planet with weapons, wars, miscellaneous armies, focusing on hassles with more powerful adversaries, and churn out more weapons than the next 14 producers combined.

Step three: Get everyone to fighting across the planet through covert interference, but be sure to keep it out of your national media so that your citizens are in the dark about where the money's gone.

Step four: Go deeply into debt to all nations, but especially to the enemies your own public went broke and lost children to fight

Step five: neutralize the value of said debt to enemies, wiping out a great deal of their capital base. Stiff 'em good.

Does this look like a people fit for survival? Darwin, are you out there to call this one?

Blah blah blah. When? That's the question. I've be...

2009-03-23T11:16:00.000-07:00

Blah blah blah. When? That's the question. I've been reading about impending dollar doom for a half decade now.

Eric: Thanks for this analysis.I have only recentl...

2009-03-23T10:33:00.000-07:00

Eric: Thanks for this analysis.
I have only recently discovered your blog on a search and am very happy I have.

I have recommened today this article and your blog to the members of PUMAPac at
www.pumapac.org

email

2009-03-23T05:41:00.001-07:00

Numonic:People don't learn, we live in the now the...

2009-03-23T05:41:00.000-07:00

Numonic:

People don't learn, we live in the now there is no past or future.

Debasing currency has been around since the beginning of trade. Pharaoh's used to mix iron with gold and silver and try to peddle it off for the same value.

I share your anger and frustration -- but we will have another fractional reserve system and another paper currency.

@Anonymous March 22, 2009 5:26 PM Perhaps the U.S....

2009-03-23T04:44:00.000-07:00

@Anonymous March 22, 2009 5:26 PM
Perhaps the U.S. are on a strategic plan in which it is not wise to use their trump (gold) just yet...

@Numonic
I understand your rage, but a short formulation would certainly help to get your point across better.

Some people say defaulting on the debt will streng...

2009-03-22T23:56:00.000-07:00

Some people say defaulting on the debt will strengthen the currency. But isn't it true that if you choose to stop increasing the money supply meaning restrict lending, making it harder and more costly to borrow then those future borrowing costs in order to be paid will have to be passed on to the consumers and therefore the higher price will be a sign of the curerency's decline? It seems to me that it is the great credit contraction that will cause prices to rise through higher borrowing/production costs being passed on to consumers not the printing of more money. It's like the deflationists say, printing that money means nothing when it's nothing compared to the debt that's sucking that newly printed money out of circulation. Although I acknowledge prices of things will rise. As far as prices rising you shouldn't be blaming it on the printing of money when we're still in a credit contraction, you need to recognize the credit contraction which will cause borrowing/production costs to rise which then will be passed on to consumers. This is what will cause prices to rise, not the printing of more money. Am I the only one that sees it this way? The newly printed money has no effect on prices because that newly printed money is being sucked out of circulation by the great credit contraction. The great credit contraction will lead to rising borrowing costs which is what will cause the rise in prices of things. Isn't this what hyperinflation is, this great credit contraction? So those expecting prices of things(not debt) to remain low until this credit contraction is over is sadly mistaken. As long as we're using a banking system of borrowing and lending, the currency can not strengthen. So if the currency is going to strengthen it's going to have to be out of the banks and in the hands of it's owners(the ones who win the bank run when the banks default). No more lending, that means no more Fractional Reserve system because the system alone is a form of lending as the people lend the banks their deposits expecting it back sometime in the future. This means hoarding cash and no more borrowing or lending. You can't expect people to trust the banking system after it just let off a big default and evaporated the wealth of everyone who trusted to store their wealth with the banks and because of that lack of trust brought on by the huge default, it will be much harder and more costly to borrow. The problem is debt, not good or toxic debt but debt period.

How is it that we expect the world to not learn fr...

2009-03-22T22:43:00.000-07:00

How is it that we expect the world to not learn from past mistakes?

We are here talking about going from one Fractional Reserve System and paper currency to another as if the destruction of one Fractional Reserve System and paper currency hasn't taught us the lesson of storing our wealth in paper held in someone elses hands. Wouldn't you think people would learn from storing their wealth in someone elses hands or letting someone else watch their money for them? Sometimes I don't blame people for being ignorant to what's really going on and why it's happening. The media keeps feeding us false information on why what is happening is happening. But even with all this false information, I can't believe after people see their or any other government print the currency to oblivion that they would have any trust at all in storing their wealth in paper or in the hands of another person(bank).

Are you trying to tell me that after the US dollar is printed to oblivion that Americans will look to the next strongest "paper" currency to store their wealth? That after their government let them down by debasing the currency that they'll trust that the same won't happen with another country's paper currency? Is this how short sighted people are?

It still baffles me that any paper currency survived after events like that in the Weimer Republic Germany or any other previous event of hyperinflation. Why is it people never learned from past events of hyperinflation? And the problem was not overprinting the money, the base of the problem was debt, letting someone else hold and watch your money for you. Trying to save the Fractional Reserve Banking system. That's why we have hyperinflation. Default is not a good look for banks. Default causes distrust in letting someone else hold and watch your money for you so when ever you trust someone else with your money and that money is paper expect them to print that paper in excess in attempts to stop default. Printing destroys the system along with the currency but defaults destroy the system much quicker. That's why they'd much rather print than default. It all leads to the end of the system but printing keeps the system alive longer than defaulting does. It's all to save the system. The Fractional Reserve System. It doesn't matter what form the money's in, as long as they can control the supply. That's the whole idea behind Fractional Reserve Banking.

Are people really going to go from one government's broken promise to not debase the currency to another government's promise to not debase the currency?

Am I the only one that feels that we are about to witness a dramatic change in the global monetary system and that paper money will no longer be used by any nation? That people across the world will stop trusting these govt. promises? Is that too idealistic for people to believe. Because I do believe money in the hands of the people instead of the bankers will be better for the world. When people become their own bank, it shows people are keeping an eye on their store of wealth and when people do that they prosper. Is this too idealistic for people to believe?

It's so frustrating that everytime someone mentions keeping their money under their mattress on the media it's done with a smirk or laugh. Ridiculing the idea of keeping your eye on your store of wealth and making sure your money is safe. They laugh if you suggest keeping your money in your own safe even when it's talking about gold/silver. As if all money should be in a third party's keeping. As if there's more risk of loosing your money in watching the money yourself than there is in letting someone else watch it for you. As if you're a nut for keeping your money in your own safe. Maybe that's because that idea goes against the Fractional Reserve Banking system and the banks run the media and do not want that kind of mentality accepted.

I just can't believe that people are going to move from one failed Fractional Reserve System to another Fractional Reserve System as if the same problem will not occur.

I believe gold and silver are returning as a medium of exchange. There is no way the Fractional Reserve System or paper currency of any nation will survive what is happening. If it does, I will have lost all hope in humanity. If it does, it's a fact people will never learn.

I just can't imagine myself putting my money in a bank, watching that bank default and then blaming the fact that I lost my money on who I trusted my money with instead of the fact that I trusted my money with anyone except myself.

Or storing my wealth in paper, watching that paper get printed to oblivion and then storing my wealth in paper again just because it's someone elses paper.

All this talk about what's going to be the next reserve currency as if anyone but the free market has control over that. If the free market were capable of being outlawed, it wouldn't be the free market.

The free market will dictate what the next world reserve currency will be and it looks for sure to be gold and silver. Defaults destroy trust in third party holdings(banks) and overprinting destroys trust in things that are easy to produce(paper). And defaults can not be stopped if the thing owed is hard to produce, which is why Fractional Reserve Banking could not work with gold/silver as the currency. Therefore after the paper currency is printed to oblivion and people loose trust in storing their wealth in anything that's easy to produce(paper), that will be the end of Fractional Reserve Banking. Even though it's not what the bankers want, at least the FRB system ended allot later than if they chose to default the first time they faced default instead of printing to avoid default. People keep talking about that the government should let the banks default, that that would save the currency but they don't talk about how that will hurt the banking system. If the banks default people will not trust banks with their money and people will be hoarding their money. I do believe that is the best thing but at the same time as long as the money is paper can you really trust it as a good store of wealth? In an instant that store of wealth can be destroyed with the printing press. On top of that if you're looking to store your wealth in something that is rare and the supply isn't increasing rappidly why choose a governments paper promise over physical gold/silver? With physical gold/silver, it's a garauntee that the money supply will not grow much because you know how hard it is to produce and supply gold/silver but with paper even if a government promises to not let the printing get out of hand, there is always the chance that it will. And it can happen so easily because of how easy it is to print paper. On top of that it's almost a garauntee the government will print to save the banks from default because if the banks default, no one will trust to store their wealth in banks and the banking system which the government benefits from will fail.

We will experience both of these things(defaults and overprinting) world wide and in order for people to protect their wealth from both angles they will run to hoarding their money themselves and storing their wealth in gold and silver. There will be battles between gold/silver and currencies that refuse to overprint and I believe gold/silver will win the battle and become the currency of choice. Unless people again fall for the head fake promise of nations that say they will not let the money supply grow too large. Of course you can't have a Fractional Reserve System without the money supply increasing. FRB means lending and lending means increasing the money supply. So the promise is a lie from the start. But for some reason people still fall for the lie. This is evident by all the instances of hyperinflation there has been throughout history. People just never learn.

Anyway I'm going to keep my eye on where I store my wealth as to not loose that wealth and those who don't will loose their wealth. I guess it's why you have rich people and poor people.

"8) US retailers will get crushed. As the dollar falls, the cost of imports for retailers will increase, but the American consumer will be unable to afford to these higher prices. Competition between desperate retailers will force them the sell inventory at below cost, creating massive losses. Retailers most heavily dependent on imports (ie: Wal-Mart) will be the first to go under. Eventually as more and more retailers go bankrupt, the few survivors will be able to raise prices enough to cover costs, and the sector will stabilize at a fraction of its current size.
"

This is what is happening and the credit crunch is causing this. The worse the credit crunch gets, the more companies go out of business. The more companies go out of business the more room and reason there is for the remaining to raise prices. I believe we will reach very small supply of companies and goods before the deleveraging is done and because there will still be much deleveraging left, to cover production/borrowing costs companies will have to raise prices very high. This is what will cause the government to start printing larger bills. It will be an attempt to stop the deleveraging so that production/borrowing costs will decline so companies won't need to raise prices. The debt is so large in order for the govt. to prevent defaults, new larger bills will have to be made because $100 bills can not be printed fast enough to stop defaults. So the streets will be paved with Federal Reserve Notes in wheelbarrows just like Weimer and Zimbabwe. this is NOT because they want to destroy the currency BUT because they want to save the Fractional Reserve Banking system. You hear it time and time again, we need to get the banks lending again. That's all they are trying to do. Save the banking system or at least milk it for as long as they can because they should know destroying the easily produced currency(paper) leads people to run to hard produced currencies(gold/silver) and I can't say this enough, Fractional Reserve Banking can not work using currencies that are hard to produce(gold/silver), otherwise defaults would not be able to be prevented and the system ends quickly.

I understand why the value of gold will soar. But ...

2009-03-22T21:28:00.000-07:00

I understand why the value of gold will soar. But gold is valued in U.S. dollars, so what will happen to the value of gold in other currencies when the U.S. dollar plunges against those currencies?

Hey Robert,I really liked your post. I also heard...

2009-03-22T20:23:00.000-07:00

Hey Robert,

I really liked your post. I also heard about the SDR idea. I noticed that the Financial Times recent series on "The Future of Capitalism" has the same set of symbols next to each article (i.e., the symbols of the Yen, Euro, Pound, and U.S. dollar). If you or anyone else have any additional info. on SDRs I would be very interested.

Thanks,
Matt

There has been talk recently of transitioning rese...

2009-03-22T20:13:00.000-07:00

There has been talk recently of transitioning reserves from USDs to SDRs.. presumably most of the old US dollars would end up being held by the IMF where they would be nicely locked away and not increasing the money supply.

Since the SDR is currently made up of USD, EUR, GBP, JPY it seems like any move of this sort would be mostly bad for the euro since it would sortof allow the USD and GBP to steal value from the EUR.

As far as a time frame, on PBS a former Chief Econ...

2009-03-22T19:38:00.000-07:00

As far as a time frame, on PBS a former Chief Economist of the IMF recently indicated that it could happen around 2011. Also, on Bloomberg TV on Saturday (3/21) Bill Gross, head of PIMCO (the largest fixed income fund in the world) indicated that he believes there will be very high inflation in the U.S. between 2011 and 2013. Therefore, this BRIEF period of deflation could last another year or two at the most before we see rampant inflation.