Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Bitcoin Price TRIGGER for Accumulating Into Alt Coins for 2022 Price Explosion - 30th Nov 21
Omicron Covid Wave 4 Impact on Financial Markets - 30th Nov 21
Can You Hear It? That’s the Crowd Booing Gold’s Downturn - 30th Nov 21
Economic and Market Impacts of Omicron Strain Covid 4th Wave - 30th Nov 21
Stock Market Historical Trends Suggest A Strengthening Bullish Trend In December - 30th Nov 21
Crypto Market Analysis: What Trading Will Look Like in 2022 for Novice and Veteran Traders? - 30th Nov 21
Best Stocks for Investing to Profit form the Metaverse and Get Rich - 29th Nov 21
Should You Invest In Real Estate In 2021? - 29th Nov 21
Silver Long-term Trend Analysis - 28th Nov 21
Silver Mining Stocks Fundamentals - 28th Nov 21
Crude Oil Didn’t Like Thanksgiving Turkey This Year - 28th Nov 21
Sheffield First Snow Winter 2021 - Snowballs and Snowmen Fun - 28th Nov 21
Stock Market Investing LESSON - Buying Value - 27th Nov 21
Corsair MP600 NVME M.2 SSD 66% Performance Loss After 6 Months of Use - Benchmark Tests - 27th Nov 21
Stock Maket Trading Lesson - How to REALLY Trade Markets - 26th Nov 21
SILVER Price Trend Analysis - 26th Nov 21
Federal Reserve Asks Americans to Eat Soy “Meat” for Thanksgiving - 26th Nov 21
Is the S&P 500 Topping or Just Consolidating? - 26th Nov 21
Is a Bigger Drop in Gold Price Just Around the Corner? - 26th Nov 21
Financial Stocks ETF Sector XLF Pullback Sets Up A New $43.60 Upside Target - 26th Nov 21
A Couple of Things to Think About Before Buying Shares - 25th Nov 21
UK Best Fixed Rate Tariff Deal is to NOT FIX Gas and Electric Energy Tariffs During Winter 2021-22 - 25th Nov 21
Stock Market Begins it's Year End Seasonal Santa Rally - 24th Nov 21
How Silver Can Conquer $50+ in 2022 - 24th Nov 21
Stock Market Betting on Hawkish Fed - 24th Nov 21
Stock Market Elliott Wave Trend Forecast - 24th Nov 21
Your once-a-year All-Access Financial Markets Analysis Pass - 24th Nov 21
Did Zillow’s $300 million flop prove me wrong? - 24th Nov 21
Now Malaysian Drivers Renew Their Kurnia Car Insurance Online With Fincrew.my - 24th Nov 21
Gold / Silver Ratio - 23rd Nov 21
Stock Market Sentiment Speaks: Can We Get To 5500SPX In 2022? But 4440SPX Comes First - 23rd Nov 21
A Month-to-month breakdown of how Much Money Individuals are Spending on Stocks - 23rd Nov 21
S&P 500: Rallying Tech Stocks vs. Plummeting Oil Stocks - 23rd Nov 21
Like the Latest Bond Flick, the US Dollar Has No Time to Die - 23rd Nov 21
Why BITCOIN NEW ALL TIME HIGH Changes EVERYTHING! - 22nd Nov 21
Cannabis ETF MJ Basing & Volatility Patterns - 22nd Nov 21
The Most Important Lesson Learned from this COVID Pandemic - 22nd Nov 21
Dow Stock Market Trend Analysis - 22nd Nov 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Is The U.S. Dollar Too Big to Fail? Gold and Silver Lifeline

Currencies / US Dollar Dec 15, 2010 - 11:00 AM GMT

By: Lorimer_Wilson

Currencies

Best Financial Markets Analysis ArticleThose in the U.S. power structure know what the plan is should the U.S. dollar fail. They are not admitting publically that there is even the remotest chance that it could happen but, rest assured, there is a plan.  There is always a plan.  To paraphrase Franklin Roosevelt, nothing happens by chance in government, so don’t be caught up in such a ‘surprise’ event - whatever it may be and whenever it occurs.


The U.S. Dollar: Too Much of a Good Thing?
The U.S. dollar really is everyone’s problem.  There are more dollars in circulation worldwide than any other currency - perhaps more than all other currencies combined as a full two-thirds of the rest of the world’s foreign reserves are denominated in U.S. dollars.  It’s also true that two-thirds of all dollars circulate outside of the United States.  They have long been the choice of exchange on the world’s black markets.  The reason is because they are so recognizable and accepted everywhere else; in other words, liquid and fungible.  They have also tended to keep their purchasing power value relatively constant until recently.  That's why many nations peg their currency to the dollar.  It also helps that it is still the world reserve currency.
 
Is the Decline of the U.S. Dollar Just A Matter of Time?
The above virtues being touted there are too many of them anymore and the law of supply and demand states that the more of something there is, the less value it has and the less demand there is for it.  The world is becoming saturated with U.S. dollars and many are looking for alternatives. As such, it is only a matter of time before the dollar does fail.   When, how, and at what speed are all that are left for debate.

What Would the Decline of the U.S. Dollar Mean For America – and the World?
Failure of the dollar would be noticeable in many ways and when it does fail we won't have to ask if it has - we'll know.  Failure of the dollar will mean many things.  It will mean that it is no longer recognized as having or retaining value.  In other words, confidence in it will be greatly or entirely diminished.  We only hold dollars (or any currency), not because they have value themselves, and not that we find them useful, but because the perception that others will accept them for goods or services.  We hold them because we have confidence that we will be able to pass them on at a later date.

A failure would mean that, at a minimum, the cost of everything, but especially anything we import, would rise dramatically.  In a worst case scenario, dollars would not be accepted in any quantity for goods or services, either domestic or foreign.

What Would Some of the Possible Triggers Be For a Decline in the U.S. Dollar?

1. The Chinese could start selling their U.S. Bonds and Treasuries. 
This would make interest rates rise, collapse demand for new offerings, and make dollars return to the U.S., thus stoking domestic inflation.

2. The dollar could suddenly or gradually stop being the world reserve currency. 
This would cause the value of the dollar on the Forex (currency market) to fall against other currencies, possibly setting off a self-fulfilling hyper- inflationary event.

3. Another currency could become backed by gold before the dollar.
This would set off a scramble to convert dollars into that currency and causing the dollar to fail as people try to get rid of them to buy the other currency.

The above are just a few of the possible scenarios that could precipitate the failure of the dollar.  The important point is that this failure is not only possible but likely, and likely to happen sooner rather than later.

How Could the Demise of the U.S. Dollar Be Avoided?

1. We could collectively start living within our means.
This would stop the debasement of the currency but such an effort would be politically and socially unacceptable to both the government and the people.

2. The U.S. could implement a new currency.
The problem with such a 'solution' is that the problem wouldn’t go away by simply erasing zeros on the currency.  The inflation dynamic would still be present if no other action were taken in conjunction with such action.

3. The Fed could hyper-inflate the economy.
Such an effort would only be a temporary solution and not a cure, however.  The U.S. Government has already caused a bubble in the Dollar, Bond, and Treasury markets.  The bailout schemes of the last few years necessitated [that] trillions of new dollars be created. 

This is the path we have been on for some time and it has masked the problem to a certain extent but this ‘solution’ would by no means be a cure.

4. The U.S. government could default on its debt obligations.
Heck, the U.S. already defaulted on its internal obligations in 1933 and to its external creditors in 1971.  The U.S. continues in default every day by issuing more dollars than can ever be redeemed at their current purchasing power.  It is the chosen path, the inflation path.  The question, however, is whether the U.S. would default en-masse on all of its remaining obligations all at one time?  If so, it would be a moon shot for gold, silver and all commodities immediately following the default.  This would likely be done at the most advantageous time (night, holiday) for the government and the worst time for you, leaving you without time to prepare or protect yourself.

5. The Fed could revalue the U.S. dollar in terms of gold.
This is already happening gradually and goes hand-in-hand with the previous two scenarios.  In this scenario, instead of the U.S. defaulting on its obligations or re-valuing the currency, it could re-value the price of gold in dollars announcing that it would pay (buy) a certain (higher) price for gold on the open market.  This would have the effect of immediately re-valuing every ounce of gold on the planet.  It would then be possible to cover our outstanding debt with our gold reserves (if they're all there), leading to a de-facto gold standard.

6. Return to a Gold Standard.
This seems to be inevitable at some point.  How we get there and the ultimate price established for an ounce of gold are up for debate.  In all likelihood, plans are already afoot and this will be a ‘surprising’ event for most when, not if, but when it does happen.

7. A combination of the above.
This is also very likely. The price of gold will simply be allowed to rise to clear the market.  They revalued gold with the stroke of a pen in the 1930's and could very well do it again.  All that needs to be done is for the government to state that it will now purchase gold for a set dollar amount and then all gold, everywhere, would be worth that amount.  Like an equity trading on a stock market, it's the last trade at the margin that sets the value of every other stock of the company.

Conclusion
Someone, somewhere, in the U.S. power structure knows what the plan is but isn’t telling us - but rest assured - there is a plan.  There is always a plan.  To paraphrase Franklin Roosevelt, nothing happens by chance in government.  Don’t be caught up in such a ‘surprise’ event - whatever it may be and whenever it occurs.

Take note: Holding physical gold is your lifeline in any of the above scenarios.

Jerry Western is the author of the newly published “Got Gold?  Get Gold!: The Everything Gold Book” on how to protect one’s wealth in the 21st century gold rush. Buy it on-line or at your favorite book store.

Visit http://www.FinancialArticleSummariesToday.com, “A site/sight for sore eyes and inquisitive minds”,  and www.munKNEE.com, “It’s all about MONEY”,  where you can sign up for their FREE weekly "Top 100 Stock Market, Asset Ratio & Economic Indicators in Review."  

© 2010 Copyright Jerry Western- All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in