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

To: Skeeter Bug who wrote (24382)	11/18/2009 4:32:10 PM
From: GST	3 Recommendations Read Replies (1) \| Respond to of 71447

<on one side, you have unlimited debt that drives the fear of deflation> Anybody who thinks that unlimited debt is driving deflation should review their assumptions. Prices quoted in dollars are not set by the level of domestic consumption when the trade value of the currency is set by our ability to borrow from abroad. If we lose unlimited access to foreign borrowing then the dollar dies, unless the difference can be made up by domestic savings. Perhaps if we had a savings rate of 60 or 70% of income we could get there. But we don't. And we won't. Domestic consumption can fall to zero and prices in dollars will still soar. Spend a weekend in Zimbabwe if this still seems too abstract. We have until now assumed that this cannot be our fate because we are 'too big to fail'. But we are not too big to fail -- we are too broke for the dollar to survive. So in the absence of devine intervention, the fate of the dollar is tied to the fate of our credit worthiness. The destruction of debt has severely undermined our credit worthiness. The demise of our access to unlimited debt is a spike driven through the heart of the dollar -- the spike that signals the point of no return, and the onset of a period of inflation from which there is no escape.