Posted October 17, 2008
Q.
Just one more thought, everyone seems to be predicting that the dollar
will collapse but no-one seems to ask himself the question in whose
interest this is. Let's look at the Chinese , they have tremendous
reserves of dollars , so for sure if the dollar collapse , they loose
everything as well. The same thing can be said of the rich Oil producing
countries (especially Saudis, Emirates).
So the US might get support from those countries as well because it's in
their own interest. So I'm wondering if the dollar could not perform
better than one might think just because the big and very rich countries
keep each other in balance because of mutual interests.
So what about the Chinese and the Arabs ?
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A. The Financial
System of the Western world is based on Fractional Reserve banking and
Fiat paper money. Because of the Credit Crunch which is the result of the
banking system and paper money, we have a recession and will probably also
see a depression (2009/10)..
In a recession and
depression Government income falls (less tax income) and expenditures rise
( i.e. more unemployment). Especially now Social Security, Pensions
and similar expenditures will soar because of the retiring baby boomers.
As we enter a
recession and depression, the Authorities will start to print more money
to keep the economy and financial system going. This action inflates
the value of the Fiat paper money (monetary inflation);
the holders of the
currency don't even need to sell it to loose in purchasing power.
Monetary
inflation generates price inflation and the purchasing power of ALL
holders (incl. Chinese and Saudis) of the currency falls.
Whether somebody wants it or not, the collapse cannot be avoided.
ALL realize Inflation
is a deliberate policy and here to stay. Nobody wants to hold the paper
money any more and it is exchanged against Real Assets at any price. The
currency (Dollar) crashes and we have Hyperinflation.
In order to postpone
the Hyperinflation cycle, authorities bring up
the “threat of deflation” . These deflationary references are merely
cleverly crafted misdirections though, designed to distract investors from
the real inflationary threat.
The US is the world’s greatest
debtor. Money printing will bring on monetary inflation, which will wipe
out those debts, savings, as well as the US dollar. That is the real scare
that markets today, as well as foreign creditors, should be pricing in. It
is only a matter of time. To borrow a line from the classic film ‘The
Usual Suspects’: The greatest trick the Devil ever pulled was convincing
the world he didn't exist.
Goldonomic, Florida, USA -
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