Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: Giordano Bruno who wrote (34963)	2/3/2011 8:43:14 AM
From: DebtBomb	Respond to of 71475

Yes....and where is it going to go? ;-O

To: Giordano Bruno who wrote (34963)	2/3/2011 8:48:48 AM
From: DebtBomb	Respond to of 71475

Here, Jimmy Rogers has the answer. youtube.com

To: Giordano Bruno who wrote (34963)	2/3/2011 9:19:49 AM
From: SARMAN	Respond to of 71475

FYI to everyone here. Tentative Outright Treasury Operation Schedule newyorkfed.org

To: Giordano Bruno who wrote (34963)	2/3/2011 9:36:39 AM
From: ggersh	Read Replies (4) \| Respond to of 71475

Richard Russell's Dow Theory Letter February 1, 2011 -- Is the US's financial position hopeless? I've studied the US finances backwards and forwards, and as I see it the US's financial position most definitely is hopeless. The actual posted national debt of the US is $14.1 trillion. However, the US reports its finances on a cash basis while omitting its unfunded obligations in such items as Social Security, Medicare and Medicaid and various other entitlements. If the entitlements are included, the total national debt including unfunded obligations would be over $100 trillion. Wait, it gets worse. Entitlements, defense and interest on the national debt takes up 80% of the entire budget of the US. That leaves just 20% that can be sliced away if the US wants to actually cut into its deficits. So what's left to cut? Actually, nothing that's politically feasible. To make the picture even more grotesque, the first group of baby boomers is now reaching the retirement age of 65. As they leave the nation's work force, the problem of financing Social Security becomes more difficult if not impossible. So what in God's name is the answer to all this? How will the US's finances be handled? There are only two ways that I can come up with. The first is -- to default, just declare that the nation is dead broke and it can't meet its obligations. That would be tantamount to admitting that the US is less than a third-rate power, a dying banana republic. Unthinkable. The second way would be to devalue the currency to the point where obligatory dollar debts would be financed or paid off with dollars equal to pennies or nickels. It's now really a question of timing. With the national debt compounding at rising rates, the problem of financing the debt becomes ever-more pressing. For this reason, I believe the process of devaluing the dollar will have to be speeded up. From the government's standpoint, the deliberate devaluation strategy must be kept secret from the public. They must not be allowed to know that the currency they've worked so hard for, that the currency their savings are in -- is to be crushed into a shadow of its former self. Ultimately, the awful truth must come out. At some point the government may be forced to be honest. The phrase will be three words that I coined many years ago: "Inflate or die." And, the government's answer will be, "You wouldn't want this nation to die, would you? We have no choice, but to pay off, or carry, the debts with a currency that must be devalued down to ten cents on the dollar. You don't have to be a genius to read the chart below. This is the Dollar Index going back a few years. First we see the long decline from July to November. Then a short rally, that was interrupted by a consolidation. Most recently, the Dollar Index dropped through the bottom of the consolidation "box." This chart is one day behind. Today the cash Dollar Index plunged again (OMG) to 76.99! At this point, the Dollar Index is oversold and probably overdue for some kind of a rally. Well, maybe. The Dow is higher again today. But what of stocks in general? I'll repeat my take on stocks. When you buy GLD you're buying a certificate that states that you own a certain amount of gold. I call this "paper gold." When you buy a share of a D-J Industrial stock, you are buying a certificate that says you are part-owner of GE or Amex. Current buyers of diamonds (DIA, the Dow) believe they are buying a share of something tangible, a certificate that says you are part-owner of 30 great companies. I believe that is the rationale for the Dow climbing wildly as it is, this despite the fact that the Dow is overbought and overloved. Buying the DIAs is tantamount to fleeing the fiat dollar. Buyers of DIAs are saying that DIA or "paper Dow" is comparable to buying shares of the exchange traded fund, GLD. Which is the real reason why the Dow has been surging. Investors who are worried about the fading dollar are buying the Dow (DIA) because they believe they are buying something that's tangible -- furthermore, they are far more comfortable owning the Dow than they are owning gold. In other words, when it comes to a safe haven, investors feel safer with the Dow than they feel with gold. To the average investors, gold remains a mystery. Furthermore, the avalanche of negative media articles about gold scare most investors. Advice -- I hope I've explained why buying the DIAs or the "paper Dow" is roughly the same as buying GLD or "paper gold."