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Strategies & Market Trends : The coming US dollar crisis -- Ignore unavailable to you. Want to Upgrade?

To: RJA_ who wrote (4323)	2/16/2008 4:21:34 AM
From: Real Man	Read Replies (3) \| Respond to of 71456

It puzzles me too, but Jim so far has been right in his broader picture. I'm not so sure his predictions of gold certificates, etc. will come true, as he has been riding the gold bull just like everyone else. The Fed is a very creepy organization - it is not easy to determine what exactly they are doing, and whatever they are doing influences the market in a major way. That makes me a conspiracy theorist too. Some folks try. I think Bart here on SI has a good grasp on what's going on at the Fed, based on limited data the Fed provides. I don't like what has been happening in the USA - a persistent decline in manufacturing in favor of services, a lot of those financial services. It smells like a major Ponzi economy, a long time to fix. Since the Fed's major role is to protect financial institutions, it seems the fix will have to occur via a financial and currency crisis. I'm really scared of hyperinflation. The reason is above - the Fed is owned by large financial institutions, and therefore is protecting them. The transfer of wealth from the real economy to speculators and the Ponzi economy becomes complete in hyperinflation - the speculators of sorts prosper, while the real economy collapses. Eventually the country is completely ruined. This goes on until the currency is anchored to something. Maybe that creepy organization, the Fed, will have to be abolished, and the grand fiat experiment of the last 37 years will have to end. Every fiat experiment in history ended badly. Will the current global fiat experiment be an exception from this rule?

To: RJA_ who wrote (4323)	2/16/2008 4:51:30 AM
From: Real Man	Read Replies (1) \| Respond to of 71456

The huge problem with reserve currency system is that it puts one country (USA, in this case) in a very privileged position - it can print the reserve currency, and exchange it for real goods and services. This obviously can't last forever, even though it did last for a very long time. Historically the time frame of one lifetime is short. For example, communism/socialism is an economic system that does not work, yet it lasted one lifetime. Eventually it had to collapse. I think the collapse of reserve currency system has already started when the Euro was introduced. The sole purpose of the Euro was for Europe to get in that advantageous position of printing a currency and exchanging it for real goods and services, competing with the dollar. However, SOMEONE has to produce goods and services. We are now at a point where the imbalances between countries that produce goods and services (oil exporters, Asia) and reserve currency countries (USA, Europe) have become enormous, even though so far the "two-party" USD/EUR system keeps the system running. This can't last forever. I would argue that the huge boom in Europe was a direct result of Euro gaining on the dollar as a reserve currency. Any currency with a current account deficit in excess of 3% would already collapse. Not the USD, so far, because of the reserve currency status. However, ultimately, the loss of reserve currency status could make the collapse worse, not better, since US has (mal)adjusted its economy in a major way - the manufacturing is virtually gone.