The coming US dollar crisis Message Board

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Strategies & Market Trends : The coming US dollar crisis

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To: maceng2 who wrote (24373)	11/17/2009 7:54:14 PM
From: GST	4 Recommendations Read Replies (3) of 71446

<What if Ben says "interest rates"?> No level of interest rates can solve the problem for the dollar. The core issue is not what most people think it is -- the core issue is that we have deficits that simply cannot be financed by us or by anybody else without resort to printing -- and not just for a few years, but from here on in. We have two choices -- 1. Outright default, as in repudiation of our debts and a collapse of our economy as we know it -- possible, but politically an idea more extreme than declaring marital law and installing a military dictator. 2. Print and inflate -- as we are now -- to fill the grand canyon of debt we are creating with paper funny money, notwithstanding that the growth of the canyon is taking place at such a pace that it can never be filled. This is the more time honored way to default -- it is known as inflation. The Japanese had a clearcut reason to facilitate a carry trade -- use the spread between Japanese bonds and US treasuries to recapitalize their banks over a long period of time -- never call in the bad loans, even if it meant a lost decade or two for Japan. We also have a clearcut reason to facilitate a carry trade -- to print enough paper currency to pretend that our debts have not overwhelmed our economy, and the global economy as well. The Japanese carry trade had an exit strategy. The US can never exit the carry trade -- the debts we have racked up cannot be repaid and the debts we are racking up today cannot be financed via either domestic nor international savings -- not now, not next year, not ever. That is because our debts are now careening down hill -- a giant snowball that we have no way of stopping and that keeps picking up speed and growing larger. That snowball is not going to magically stop, roll itself back up the hill, and shrink to a harmless size. There will be no unwinding of the carry trade. There is no exit strategy. There is only one exit for the dollar -- rolling downhill till it gets to the bottom. By the way -- that is why it is so easy to buy gold and forget about it -- you can just come back in five years and shake your head in disbelief at what has transpired for the US dollar. We are in a dollar crisis -- a dollar bubble. And the crisis grows ever worse by the day.

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