March 26, 2009
Don't Be Last Person Out of the Dollar
The United States is for all intents and purposes bankrupt and the main reason our country has been able to continue operating with an $11 trillion national debt and $55 trillion in unfunded liabilities is the Dollar's status of being the world's reserve currency.
As the world's reserve currency, U.S. Dollars must be held by central banks around the world in order for foreign governments to pay international debts and purchase important commodities like Oil.
The U.S. Dollar became the world's reserve currency because it was backed by Gold. Today, it is backed by nothing but faith that it will always be accepted as money. With $11.4 trillion now being allocated by the Federal Reserve and U.S. Treasury for bailouts and stimulus's, the world is beginning to realize that the purchasing power of their U.S. Dollar reserves is about to be drastically debased.
Russia announced last week that they are calling for a discussion at the April 2nd G20 summit in London on how to replace the Dollar as the world's reserve currency. China followed this week, also calling for a replacement of the Dollar; even going as far as to suggest using a special basket of currencies comprised of Dollars, Euros, Sterling and Yen to serve as a super-sovereign reserve currency that would not be easily influenced by individual country's policies.
While China's idea would be a step in the right direction; ultimately, we believe the world needs to return to a currency that is backed by Gold. If the U.S. had remained on a Gold standard, the world would not be in the financial crisis it is today because we wouldn't have had the dot-com and Real Estate bubbles of the past decade.
Its insane how there is now talk of creating a new Systemic Risk Regulator in the U.S., when it is the Federal Reserve itself that created the booms and busts with artificially low interest rates. Systemic risk is a fallacy. Sure, the collapse of Lehman Brothers brought down some other financial firms, but so what. Companies like AIG need to fail in order for the economy to start rebalancing itself and have a chance of ever recovering.
The only thing our country can't afford to have fail is the Dollar, because millions of baby boomers are getting ready to retire and will be relying on their pensions and savings to live. The politicians in Washington don't care if these people are able to retire or not, all they care about is keeping our fake economy propped up for another year or two in order to get reelected.
They will soon learn that you can't reinflate a bubble as Americans start to wake up and begin pouring their Dollars into real, hard assets like Gold and Silver. Don't be the last person out of the Dollar.
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