Are you ready for this? A $ now is going to be 15 Cents by 2011. Read on

[gapala]

Guys, I am not sure why the Media is 'mum' on this "hyperinflation" plan? I have read this article a week ago but was trying to comprehend the reality... It become important as China openly demands to backup the debt with some kind of collateral.. and even to float an alternative Global currency to USD.

Think about what is going to happen to 401K, stock market, Other savings for old age days?

Its kind of draws a scary picture of future in this country. I thought, will share this with you guys.. to chew.

When, in July 1944, 44 Allied Nations decided to create the first-ever global economic and financial order, they chose to link their currencies to the value of the Gold (Gold-Standard). Then in 1971, due to big financial strains, the Gold-Standard collapsed as the USA unilaterally decided to abolish the convertibility of the USD to Gold. That de facto installed the Dollar as the Reserve Currency. This era is now coming to an end. And the awakening will be painful!

*****Fed Planning 15-Fold Increase In US Monetary Base*****
by Eric deCarbonnel

The fed is planning moves that would more than double its balance-sheet assets by September to $4.5 trillion from $1.9 trillion. Whether expressing approval or concern over the fed’s intentions, most commentators fail to understand the real magnitude of the projected expansion of the US monetary base because they don’t take into account the amount of dollars circulating abroad.

At least 70 percent of all US currency is held outside the country, and this means the US monetary base is considerably smaller than the fed’s overall balance sheet. Take, for example, the true US domestic money supply at the beginning of September 2008, before the fed started its quantitative easing. From the Federal Reserve’s website, we know that currency in circulation was 833 Billion. This translates as 583 Billion dollars circulating abroad (70 percent), and 250 Billion dollars circulating domestically (30 percent). Since the bank reserve balances held with Federal Reserve Banks were 12 billion, that gives us a 262 Billion domestic monetary base as of September 2008. Now compare that to the projected US domestic monetary base for September 2009 which is 3,818 billion (4,500 billion – 583 billion (dollars circulating abroad) – 99 billion (other fed liabilities not part of the money supply)). The fed’s planned balance sheet expansion results in a 15-fold increase in the base money supply.


262 Billion = US monetary base as of September 2008 (minus dollars held abroad)
3,818 Billion = projected US monetary base in September 2009 (minus dollars held abroad)

3,818 Billion / 262 Billion = 15-Fold Increase in US monetary base


This is a staggering devaluation of the US currency! It means that for every dollar in America in September 2008, the fed is going to create fourteen more of them! Below is a rough sketch of what this increase in US monetary base would look like:

This 15-Fold Increase will be impossible to reverse. The realities which will hinder the fed’s control of the money supply are:

1) The toxic assets filling its balance sheet

Expanding the money supply is easy. All the fed has to do is print dollars and then use them to buy assets. There is no effective limit to how much the fed can print and spend.

Shrinking the money is much trickier. To shrink the base money supply, the fed sell assets and takes the dollars it receives for them out of circulation. The amount the fed can shrink the money supply is therefore effectively limited by the market value of assets on its balance sheets. Since the fed is in the process of loading up on toxic securities while trying to restore health to the financial sector, it is now sitting billions of unrealized losses. These unrealized losses means the fed has little ammunition available to bring the money supply under control.

2) Political constrains on fed's actions

Even if the fed does try to shrink the money, it is likely to run into political constrains on its actions:

A) Selling toxic assets at a loss could become a crippling source of major embarrassment for the fed, undermining its authority. For example, last year when the fed took 29 billion toxic assets to help JPMorgan’s takeover of Bear Stearns, it assured Americans that by holding those securities till maturity, the cost to taxpayers would be minimal. If the fed sells those toxic Bearn Stearns assets at a catastrophic loss, it would cause fury and outrage from voters and lawmakers.

B) Selling assets at below book value will quickly cause the fed’s equity to turn negative. The Federal Reserve would then need to be recapitalized by new debt from the treasury, which would increase the national debt.

3) The benefits from of its balance sheet expansion would be lost if the fed starts selling assets

The fed is accumulating toxic mortgage backed securities, long term treasuries, and other assets to unfreeze the credit markets and spur economic growth. Turning around and selling those assets would result in the collapse of the credit markets and the financial system, which the fed has been desperately trying to prevent.

Upwards pressure on interest rates

On top of all the issues above, the fed’s woes are going to be compounded by upwards pressure on the yields of treasuries and other US debt. This upwards pressure will likely force the fed to monetize far more treasuries than the planned $300 billion purchases it has already announced, and will greatly complicate any efforts by the fed to control the money supply.

Below are the nine factors which will cause yields to move higher.


1) Massive supply of treasuries in the pipeline

The biggest force pressuring treasury yield upward is without a doubt the trillions of debt the treasury has to sell to finance the enormous 2009 budget deficit. There is nowhere near enough buyers to absorb this supply. The graph below demonstrates the challenge facing the treasury in funding this year’s budget.

2) As a reserve asset, treasury bonds will face enormous selling pressure in 2009

There is the mistaken belief that the role of treasuries as a safe haven is bullish for treasury bonds. It is not. This logic ignores the reality that reserve assets, such as treasuries, are accumulate in good times and sold in bad times:

Federal and state agencies will be selling treasury reserves. For example, the Deposit Insurance Fund (a.k.a. FDIC) will be selling treasuries to pay back depositors of failed banks, and the Unemployment Trust Fund will be selling treasuries to make payments to the unemployed.

State and local governments will be selling treasury reserves. As an example, states have already begun drawing down reserves as their budget troubles worsen. The bulk of those reserve remain, and they will be sold over the course of this year.

Banks and insurers will be selling off their treasury loan-loss reserves. Financial institutions have been building their treasury loan-loss reserve for the last year in anticipation of growing defaults. In 2009, this process will reverse as loans go bad and insurers make good on claims.

Foreign central banks will be selling off their treasury foreign reserves. Saudi Arabia, for example, is projecting a 2009 Budget Deficit, which it intends to finance by selling off its US holdings. Russia, meanwhile, has already sold over 20% of its $598.1 billion reserves, and India's central bank has been forced to sell off its US holdings to curb its currency's decline, and its total reserves have decreased by $62.2 billion. Japan, which is now running a record current account deficit, can also be expected to sell treasuries.

Even China could become a seller of treasuries as it mobilizes its dollar reserves. The Chinese government has sent clear signals that it is shifting from passive to active management of its reserve and is exploring more efficient ways to use its reserves to boost its domestic economy.


3) Retirement inflows into treasuries are over

The steady accumulation of treasuries by government retirement funds has helped absorb the supply of treasury bonds for over three decades. This accumulation of government debt to secure the retirement of baby boomers helped drive down treasury yields and fund deficit spending. As of September 2008, the four biggest of these funds held 3.3 trillion treasuries:

2150 billion (Federal old-age and survivors insurance trust fund)
615 billion (Federal employees retirement fund)
318 billion (federal hospital insurance trust fund)
217 billion (federal disability insurance trust fund) (for more on these four funds, see where social security tax amounts are deposited)

3300 billion total

Today, the accumulation of treasuries by government retirement funds is over. Baby boomers are beginning to retire, increasing outflows, and unemployment is rising, cutting inflows. More importantly, the 3.3 trillion already accumulated in these funds provides an enormous political incentive to prevent treasury prices from collapsing. Faced with a run on treasuries, politicians, rather than explaining to baby boomers that their retirement savings are gone, will instruct the fed to monetize treasury bonds. This alone will prevent the fed from reversing its current balance sheet expansion.


For more analytical (charts etc.) views and full article.. follow the link. http://www.marketskeptics.com/2009/0...ase-in-us.html

[minimalist]

a $ to be 35Rs by 2009. See where the $ is at now and where Lehman bros is.

Originally Posted by gapala

Guys, I am not sure why the Media is 'mum' on this "hyperinflation" plan? I have read this article a week ago but was trying to comprehend the reality... It become important as China openly demands to backup the debt with some kind of collateral.. and even to float an alternative Global currency to USD.

Think about what is going to happen to 401K, stock market, Other savings for old age days?

Its kind of draws a scary picture of future in this country. I thought, will share this with you guys.. to chew.


*****Fed Planning 15-Fold Increase In US Monetary Base*****
by Eric deCarbonnel

The fed is planning moves that would more than double its balance-sheet assets by September to $4.5 trillion from $1.9 trillion. Whether expressing approval or concern over the fed’s intentions, most commentators fail to understand the real magnitude of the projected expansion of the US monetary base because they don’t take into account the amount of dollars circulating abroad.

At least 70 percent of all US currency is held outside the country, and this means the US monetary base is considerably smaller than the fed’s overall balance sheet. Take, for example, the true US domestic money supply at the beginning of September 2008, before the fed started its quantitative easing. From the Federal Reserve’s website, we know that currency in circulation was 833 Billion. This translates as 583 Billion dollars circulating abroad (70 percent), and 250 Billion dollars circulating domestically (30 percent). Since the bank reserve balances held with Federal Reserve Banks were 12 billion, that gives us a 262 Billion domestic monetary base as of September 2008. Now compare that to the projected US domestic monetary base for September 2009 which is 3,818 billion (4,500 billion – 583 billion (dollars circulating abroad) – 99 billion (other fed liabilities not part of the money supply)). The fed’s planned balance sheet expansion results in a 15-fold increase in the base money supply.


262 Billion = US monetary base as of September 2008 (minus dollars held abroad)
3,818 Billion = projected US monetary base in September 2009 (minus dollars held abroad)

3,818 Billion / 262 Billion = 15-Fold Increase in US monetary base


This is a staggering devaluation of the US currency! It means that for every dollar in America in September 2008, the fed is going to create fourteen more of them! Below is a rough sketch of what this increase in US monetary base would look like:

This 15-Fold Increase will be impossible to reverse

Next September, when the fed realizes it has gone too far and tries to reverse its balance sheet expansion, it will be unable to do so. The realities which will hinder the fed’s control of the money supply are:

1) The toxic assets filling its balance sheet

Expanding the money supply is easy. All the fed has to do is print dollars and then use them to buy assets. There is no effective limit to how much the fed can print and spend.

Shrinking the money is much trickier. To shrink the base money supply, the fed sell assets and takes the dollars it receives for them out of circulation. The amount the fed can shrink the money supply is therefore effectively limited by the market value of assets on its balance sheets. Since the fed is in the process of loading up on toxic securities while trying to restore health to the financial sector, it is now sitting billions of unrealized losses. These unrealized losses means the fed has little ammunition available to bring the money supply under control.

Once September rolls around, If the fed wants to reverse the expansion of its balance sheet and shrink the monetary base back down from 3,818 billion to 262 billion, then it will need to sell 3,556 billion worth of assets. However, the market value of its assets will only be worth a fraction of that.

2) Political constrains on fed's actions

Even if the fed does try to shrink the money, it is likely to run into political constrains on its actions:

A) Selling toxic assets at a loss could become a crippling source of major embarrassment for the fed, undermining its authority. For example, last year when the fed took 29 billion toxic assets to help JPMorgan’s takeover of Bear Stearns, it assured Americans that by holding those securities till maturity, the cost to taxpayers would be minimal. If the fed sells those toxic Bearn Stearns assets at a catastrophic loss, it would cause fury and outrage from voters and lawmakers.

B) Selling assets at below book value will quickly cause the fed’s equity to turn negative. The Federal Reserve would then need to be recapitalized by new debt from the treasury, which would increase the national debt.

3) The benefits from of its balance sheet expansion would be lost if the fed starts selling assets

The fed is accumulating toxic mortgage backed securities, long term treasuries, and other assets to unfreeze the credit markets and spur economic growth. Turning around and selling those assets would result in the collapse of the credit markets and the financial system, which the fed has been desperately trying to prevent.

Upwards pressure on interest rates

On top of all the issues above, the fed’s woes are going to be compounded by upwards pressure on the yields of treasuries and other US debt. This upwards pressure will likely force the fed to monetize far more treasuries than the planned $300 billion purchases it has already announced, and will greatly complicate any efforts by the fed to control the money supply.

Below are the nine factors which will cause yields to move higher.


1) Massive supply of treasuries in the pipeline

The biggest force pressuring treasury yield upward is without a doubt the trillions of debt the treasury has to sell to finance the enormous 2009 budget deficit. There is nowhere near enough buyers to absorb this supply. The graph below demonstrates the challenge facing the treasury in funding this year’s budget.

2) As a reserve asset, treasury bonds will face enormous selling pressure in 2009

There is the mistaken belief that the role of treasuries as a safe haven is bullish for treasury bonds. It is not. This logic ignores the reality that reserve assets, such as treasuries, are accumulate in good times and sold in bad times:

Federal and state agencies will be selling treasury reserves. For example, the Deposit Insurance Fund (a.k.a. FDIC) will be selling treasuries to pay back depositors of failed banks, and the Unemployment Trust Fund will be selling treasuries to make payments to the unemployed.

State and local governments will be selling treasury reserves. As an example, states have already begun drawing down reserves as their budget troubles worsen. The bulk of those reserve remain, and they will be sold over the course of this year.

Banks and insurers will be selling off their treasury loan-loss reserves. Financial institutions have been building their treasury loan-loss reserve for the last year in anticipation of growing defaults. In 2009, this process will reverse as loans go bad and insurers make good on claims.

Foreign central banks will be selling off their treasury foreign reserves. Saudi Arabia, for example, is projecting a 2009 Budget Deficit, which it intends to finance by selling off its US holdings. Russia, meanwhile, has already sold over 20% of its $598.1 billion reserves, and India's central bank has been forced to sell off its US holdings to curb its currency's decline, and its total reserves have decreased by $62.2 billion. Japan, which is now running a record current account deficit, can also be expected to sell treasuries.

Even China could become a seller of treasuries as it mobilizes its dollar reserves. The Chinese government has sent clear signals that it is shifting from passive to active management of its reserve and is exploring more efficient ways to use its reserves to boost its domestic economy.


3) Retirement inflows into treasuries are over

The steady accumulation of treasuries by government retirement funds has helped absorb the supply of treasury bonds for over three decades. This accumulation of government debt to secure the retirement of baby boomers helped drive down treasury yields and fund deficit spending. As of September 2008, the four biggest of these funds held 3.3 trillion treasuries:

2150 billion (Federal old-age and survivors insurance trust fund)
615 billion (Federal employees retirement fund)
318 billion (federal hospital insurance trust fund)
217 billion (federal disability insurance trust fund) (for more on these four funds, see where social security tax amounts are deposited)

3300 billion total

Today, the accumulation of treasuries by government retirement funds is over. Baby boomers are beginning to retire, increasing outflows, and unemployment is rising, cutting inflows. More importantly, the 3.3 trillion already accumulated in these funds provides an enormous political incentive to prevent treasury prices from collapsing. Faced with a run on treasuries, politicians, rather than explaining to baby boomers that their retirement savings are gone, will instruct the fed to monetize treasury bonds. This alone will prevent the fed from reversing its current balance sheet expansion.


For more analytical (charts etc.) views and full article.. follow the link. http://www.marketskeptics.com/2009/0...ase-in-us.html

[meetpravee]

Nice article. Worth reading.

[dummgelauft]

Thanks Gapala, Dude you are a breath of fresh air on this forum. I have been saying this after doing exhaustive reading and research. This is going to happen, eve without the Fed doing anything to the monetary base.
Imagine the following two scenarios:
(1) China dumps al lor a big portion of the $4.0 TRILLION that they hold.
(2) OPEC unpegs itself from the dollar and starts trading in Euro or some other currency.

Any one of these will reduce the dollar to the status of Zim Dollar (google Zim dollar), but I sure you know what I am talking about. It is unwise to hold your savings in US dollars right now. Buy your wife al lthe gold she wants. You will be thankful you did.

Buckle down dude, it is gouing to be a bumby ride and a rough landing.

[gapala]

Originally Posted by minimalist

a $ to be 35Rs by 2009. See where the $ is at now and where Lehman bros is.

Can you post that article here? I cannot recollect whether the forecast by Lehman was based on any facts.. I guess that was just their expectation based on the "Trend" then, as the RS. was rising against dollars in 2008 and reached somewhere around 1USD= Rs. 38... link to article would help verify this.. This article is very analytical and scenario based which makes it interesting and more reliable.

[sledge_hammer]

I'm sure China, the biggest buyer of US Treasuries, and so many other countries that have their foreign exchagnes in USD, will not want the dollar to lose its value. They are going to want the US govt. to take measures to prevent excess printing of the currency. Everyone thought that the government will print money to support the huge stimulus plan. But instead, they are funding it by selling large quantities of debt. This does not guarantee that they are not going to be printing some extra currencies, but at least there is going to be some restraint, I hope. Also, I read somewhere that the US does not make it public the amount of dollars it prints. That could change if China, and other big weights pressure US, or maybe not?

Originally Posted by gapala

Guys, I am not sure why the Media is 'mum' on this "hyperinflation" plan? I have read this article a week ago but was trying to comprehend the reality... It become important as China openly demands to backup the debt with some kind of collateral.. and even to float an alternative Global currency to USD.

Think about what is going to happen to 401K, stock market, Other savings for old age days?

Its kind of draws a scary picture of future in this country. I thought, will share this with you guys.. to chew.

[sledge_hammer]

I'm not sure how realistic this scenario is. Remember, US is the biggest consumer of Chinese goods. If China dumps its dollars, the the USD loses value, it is going to become extremely expensive for the US consumer to buy Chinese goods. Dumping US dollars will hurt the Chinese more than the US.

Originally Posted by dummgelauft

Thanks Gapala, Dude you are a breath of fresh air on this forum. I have been saying this after doing exhaustive reading and research. This is going to happen, eve without the Fed doing anything to the monetary base.
Imagine the following two scenarios:
(1) China dumps al lor a big portion of the $4.0 TRILLION that they hold.
(2) OPEC unpegs itself from the dollar and starts trading in Euro or some other currency.

Any one of these will reduce the dollar to the status of Zim Dollar (google Zim dollar), but I sure you know what I am talking about. It is unwise to hold your savings in US dollars right now. Buy your wife al lthe gold she wants. You will be thankful you did.

Buckle down dude, it is gouing to be a bumby ride and a rough landing.

[gapala]

Originally Posted by sledge_hammer

I'm sure China, the biggest buyer of US Treasuries, and so many other countries that have their foreign exchagnes in USD, will not want the dollar to lose its value. They are going to want the US govt. to take measures to prevent excess printing of the currency. Everyone thought that the government will print money to support the huge stimulus plan. But instead, they are funding it by selling large quantities of debt. This does not guarantee that they are not going to be printing some extra currencies, but at least there is going to be some restraint, I hope. Also, I read somewhere that the US does not make it public the amount of dollars it prints. That could change if China, and other big weights pressure US, or maybe not?

Problem is US borrow around $2 bn every day to run the show including all our spending.. this is nothing but that negative 7% in savings.. in other words, to cover spending money that we do not have.. Now we borrow that from countries like China, India, Middle Eastern and European countries by giving them tissue papers.

Now they started to demand that debt be backed by collateral such as capitol hill or whitehouse or other govt owned properties (ofcourse with whatever screwed up asset valuation). China followed this up by a proposal for Global currency.. This will lead to total collapse of $ if goes through G20 support.

Fed is using a strong arm tactics to stop this from happening by "hyperinflating the domestic economy which will eventually lead to devaluation of debt / reserve held by other countries... But Other countries are already increasing domestic consumption / less dependency on export to US and mitigating the risk by trading other countries to guard against this and eventually will survive the devalued $ effect. Question before other countries is this, whether to write off what debts they have now or increase the debt and write off in future.. by screwing up the savings of the people in those countries. This game is becomming nasty

Its only US who will suffer just like Zimbawe.

Its the Federal reserve which does not disclose their full balance sheet other than these forecasts and numbers here and there.. Currencies in circulation is always disclosed.

[reddog]

China will never dump its dollar and is still buying treasuries.
ONe, China is here bcos of its trade with the US and second, for china to be a powerful force, holding US treasuries is the best way to do it.
US by any standards has a huge huge military advantage over china. just a point, outside economics, which is very related.

And what would china hold if not the US dollar?
The euro would have been a nice bet a year back, but not anymore.
The yen? China holding all its debt in japanese currency? doubt it.
OR gold? yeah, with the rates fluctuating so much and the market so volatile, no way.

the risk of the dollar devaluation? Yes, it is very much a risk, but why would china not even dump a small percentage of its debt.
bcos of the same reason. a partial dump at this rate, would wipe off its entire portfolio of US holdings.
of its 2 trillion dollar assets, 70% is in dollar denomination. you know what a bearish market does for the rest of the index?

and where would it go then?
The US is extremely active in getting its economic house straightened up.
Europe? not very much so.

[gapala]

Many of us have seen the video posted recently by other member on the forum "speach by Mr. Venkatesh a year back" an economist in India. This is perfectly in line with his predictions.. See below.

Why the End of America is Closer than You Think
by: Mike Adams, the Health Ranger, NaturalNews Editor

I recently moved to Ecuador. Not for a vacation. Not for a month or two. I moved to Ecuador for good, as a permanent resident. Upon hearing my plans for living in South America, many people who knew me in the States asked things like, "Well what about the stability of Ecuador as a nation?" To which I would respond, "Oh, you mean the stability of banks that don't make loans and don't invest in derivatives? You mean the stability of a nation where the population still has the courage to march in the streets and throw corrupt officials out of its capitol?"

These questions make Americans pause. Most tend to think of public demonstrations as signs of a political instability. But in fact, public demonstrations are a sign of a healthy Democratic process. And Democracy is alive and well in Ecuador (with the usual level of corruption you find in any democracy).

It is in America, where the sheeple have been terrorized into staying inside the boundaries of their little "protest zones," that you find a fragile, unstable nation.

Through complacency and fear-mongering, most Americans have become cowards when it comes to political activism. They think emailing their Senator a few times a year is all that's required to defend freedom and preserve a nation. Marching in the streets is seen as uncivilized... or even unpatriotic! The government agrees with this, too, now labeling anyone who protests in public a "potential terrorist" and targeting them for FBI investigations. (http://www.foxnews.com/story/0%2C29...)


The multi-trillion-dollar theft scheme
In the mean time, while the sheeple of America are caught up in their hypnotic dreams of world domination, white-collar hoodlums in Washington D.C. and Wall Street are stealing everything!

The oft-repeated creation of $1 trillion in new money out of thin air by the Federal Reserve has made the U.S. dollar the laughing stock of the world. The leaders of the G20 nations have already decided to ditch the dollar and shift to other world reserve currencies, and China is now blatantly and publicly asking the U.S. put up some kind of collateral to back up future debt purchases, to which the U.S. says "Don't worry about the debt. We're good for it!"

And when $165 million in bonus money got paid to AIG employees, the tyrants in Washington demonstrated the true reach of their confiscatory punishment by enacting, within mere days, a 90% income tax rate on those bonuses. Sure, I agree those AIG executives deserve no bonus money, but the fact that the legislative branch of the U.S. government can reach out and hammer a targeted group of U.S. citizens with a retroactive 90% income tax rate should send shivers through any American that earns any income at all.

It has all taken on the caricature of a political circus. The perception around the world now is that America is not merely a land of the incompetent and the bankrupt; it's also a land of fiscal buffoons and political puppets who have no real ability to save the crashing economy.


The Fed's plan to increase the money supply 15-fold
But the real story starts to unfold when you realize the Federal Reserve is now hell bent on multiplying the U.S. money supply by a whopping fifteen times in 2009! Now think about this: If the Federal Reserve increases the U.S. money supply by a factor of fifteen, that means your dollars will be worth only 1/15th the value they represent right now. So a loaf of bread that costs a dollar right now could cost $15 when all this extra money ripples through the system. (Which will obviously take a couple of years, but 2009 will be the beginning of it.)

This is called "hyperinflation." We're talking about a loss of over 93% of the purchasing power of the dollar. That, my friends, is called a collapse of the currency.

And once it starts, the floodgates will be opened and the tsunami of investors and nations offloading dollars will be catastrophic and irreversible. By the time it's all done, the dollar might end up losing 99.9% of its value, and you can use greenbacks to light a fire or wipe your back side, as they will be useless for anything else.

Why America's currency -- and government -- is headed for total collapse
That's why I say America's days are numbered. The America as we know it, at least. This repeated creation of trillions of dollars in new money by the Federal Reserve is the last great looting of the U.S. economy by the wealthy elite. The Titanic is sinking, and high officials have monopolized the life rafts, leaving everyone else to drown with the ship. And while they're rowing away from the doomed vessel that's taking on water, they shout back to the low-income workers clinging to the rails, "Don't worry! The ship isn't really sinking. It's just 'correcting!'"

The truth is that America IS sinking -- and it's not just the currency I'm talking about here: America's criminal health care system has sickened the population and outlawed any real healing practices, too. Meanwhile, the FDA and FTC have attempted to destroy all knowledge of natural remedies that can prevent and cure disease, further compromising the future of the American People.

On the dollars-and-cents side, America's economy is a fictitious mish-mash of corporations selling poisons to the people, and people buying junk they don't need, and everybody paying through the nose for disease care services that ultimately provide no net benefit to the population.

America's infrastructure is crumbling, its industries are already gutted, and its exports resemble third-world agricultural nations more than first-world developed nations. Its political leadership is, with very few exceptions, a band of diseased, ignorant influence peddlers who sell out their constituents at every opportunity.

Perhaps more importantly, America has abandoned the principle of law. Laws no longer matter in America because they are selectively enforced only against those who threaten powerful institutions or corporations. America is no longer a nation of freedom and justice for all. Rather, it is a nation of greed and profit for the few, followed by oppression and bankruptcy for everybody else.


What's coming soon for America
Given these circumstances, it is not difficult to predict the demise of America as we know it. The U.S. dollar will eventually collapse or be abandoned. This could happen literally overnight, or it could take years, but make no mistake: The American people will not be forewarned of the collapse of the dollar. It will be a sudden, surprise announcement, and all the politicians and banking elitists who engineered the whole thing will pronounce their "shock" that such a thing could happen! "We could never have predicted this," they will insist, even while the whole thing was actually engineered by the very same people.

One day, Americans will wake up and discover that all banks are on "bank holidays" (which means that someone in Washington is taking a holiday with your money while YOU can't access it).

Within hours, the National Guard will roll into the cities of the United States, and Americans will find themselves penniless prisoners in their own country. Anyone who protests will be arrested or shot. Law will be dispensed at the end of military rifles, and the President will get on television and explain how this is all being done for YOUR benefit! It's for your own safety and protection, didn't you know?

From here, it's difficult to say exactly what will unfold. We could see UN troops on U.S. soil, the IMF taking over the U.S. banking system, and the forced transition to a global currency. Other possibilities include the Balkanization of the formerly-united States of America, with regional nation-states declaring their own independence from Washington.

During this chaos, just-in-time delivery of food and products will grind to a halt. Store shelves will be emptied. A healthy economy of barter will immediately spring up to fill the void. Those who have things to trade (toilet paper, butter, salt, sugar, matches, gold, silver, food, fuel, etc.) will eat. Those who don't will starve. Health will plummet and infectious disease will become a very real threat in many cities. The conventional medical system will, of course, be utterly useless and will run out of medicine within days or weeks.

This economic transition chaos will be short-lived, however, and from the ashes of economic turmoil will spring a new nation (or nations) of People who have finally awakened from their complacency. New governments will be forged, and the fields of economic ruin will be ripe for the planting and sprouting of new ideas from a new generation of visionary leaders.

http://www.counterthink.com/025688.html

[gapala]

Originally Posted by reddog

China will never dump its dollar and is still buying treasuries.
ONe, China is here bcos of its trade with the US and second, for china to be a powerful force, holding US treasuries is the best way to do it.
US by any standards has a huge huge military advantage over china. just a point, outside economics, which is very related.

And what would china hold if not the US dollar?
The euro would have been a nice bet a year back, but not anymore.
The yen? China holding all its debt in japanese currency? doubt it.
OR gold? yeah, with the rates fluctuating so much and the market so volatile, no way.

the risk of the dollar devaluation? Yes, it is very much a risk, but why would china not even dump a small percentage of its debt.
bcos of the same reason. a partial dump at this rate, would wipe off its entire portfolio of US holdings.
of its 2 trillion dollar assets, 70% is in dollar denomination. you know what a bearish market does for the rest of the index?

and where would it go then?
The US is extremely active in getting its economic house straightened up.
Europe? not very much so.

Have you read their latest 5 year plan? I will try to post the link to bullet points.. you will then be able to relate to this article. They have already realized the risk of USD dependency and reserve.. they will soon try to mitigate this risk along with other countries who are in line with their interest including Japan, middle eastern countries and India. See what is happening in G20 now.

On the other note, I can't imagine why people spit nasty words with "Red" even when you share an article. I respect the disagreement with the writer.. this is Rediculously Unbelievable, so called "highly skilled" workers I rest.

[sledge_hammer]

I actually do not believe that China will NEVER sell the USD. It is all a matter of timing. Now is definitely not in Chinese inteest to dump any of its USD. You don't need a rocket scientist to know not to buy high and sell low.

Just like how the everyone needs to diversify their portfolio, China too will diversify its foreign currencies. In the future its not going to be that she will have like close to 100% of its foreign curreny in USD. She will go for a mix of Euros, maybe Rubles, maybe Rupees, who knows!

A few weeks back the US sold a lot of its debt to fund the stimulus package and Chinese were there first in line to buy some. It's investment 101 - buy low! The US will sure come out of this mess one day, and that's what the Chinese are anticipating.

Originally Posted by reddog

China will never dump its dollar and is still buying treasuries.
ONe, China is here bcos of its trade with the US and second, for china to be a powerful force, holding US treasuries is the best way to do it.
US by any standards has a huge huge military advantage over china. just a point, outside economics, which is very related.

And what would china hold if not the US dollar?
The euro would have been a nice bet a year back, but not anymore.
The yen? China holding all its debt in japanese currency? doubt it.
OR gold? yeah, with the rates fluctuating so much and the market so volatile, no way.

the risk of the dollar devaluation? Yes, it is very much a risk, but why would china not even dump a small percentage of its debt.
bcos of the same reason. a partial dump at this rate, would wipe off its entire portfolio of US holdings.
of its 2 trillion dollar assets, 70% is in dollar denomination. you know what a bearish market does for the rest of the index?

and where would it go then?
The US is extremely active in getting its economic house straightened up.
Europe? not very much so.

[sanju]

Where was Eric prior to Oct-2008? Was he managing some hedge funds in some big shot investment bank? Did he predict any of the current financial mess in 2007? I searched, but could not find any such articles/blogs by Eric.

Whenever something happens, many so called experts will crop up "predicting" armageddon AFTER THE FACT. Folks such as these and Jim Cramer were telling everyone that things are going fine at the Wall Street, keep buying stocks and investing in your 401K, we live in a perfect world because there is walgreens in my neighborhood, blah blah blah blah.

Now that things have turned south, these so called experts are predicting that the sky will fall.

These guys are in the business of "making the news" otherwise no one will read it. Selling news is a business. You won't be reading and quoting from an article by "Eric deCarbonnel" if he'd say $1=$1 in Sep-2009. You will read his article and make him famous if he says that the sky will fall tomorrow. So take these exaggerations with a grain of salt. Things are bad, we all know that, but things are bad all over the world.

Imagine another scenario, if there would be hyperinflation, wouldn't you want to take a mortgage and buy a house say $500,000. After Sept-09, the value of the mortgage will be 500,000X0.07= $35,000 in todays currency. So that means its time to buy property, not keep liquid cash, invest in market, which will drive up market and housing market. Congratulations, by Sept-09 we would all be millionaires $$$$.


.

[gcnotfiledyet]

All these gloom and doom predictions pop up whenever economy turns south. There are so many ifs in their predictions that it makes your head spin. My guess is people don't realize how big US economy is. It is equal to rest of the countries in top 10 combined. Most in top 10 are heavily dependent on exports to US. Look what happened to China, Japan once west slowed consumption of their goods. So giving China such big marks for serving Americans is bad grading. If China has big holdingsin USD then their must be a reason. They have good economists as well and still they did not diversify enough. Their products are mostly sold to US and they do not have any other choice. Zimbabwe uses USD when their currency is worthless. Comparing Zimbabwe to US is utter stupidity. People talk about China dumping US treasuries. Let me ask you, who will buy it when they are ready to dump it? You? If yes, with what?

Its so easy to forget that USD is international currency for a reason. It is currency of an advanced nation, with highly advanced military, highly developed infrastructure, huge pool of scientists/economists/etc, huge agriculture production etc etc. It has huge natural resources and extraordinary innovation capability. US can close its borders and still survive. Can you say this about any other country in the world? Quit spreading this gloom and doom. Utter madness.

[gapala]

Originally Posted by sanju

Imagine another scenario, if there would be hyperinflation, wouldn't you want to take a mortgage and buy a house say $500,000. After Sept-09, the value of the mortgage will be 500,000X0.07= $35,000 in todays currency. So that means its time to buy property, not keep liquid cash, invest in market, which will drive up market and housing market. Congratulations, by Sept-09 we would all be millionaires $$$$.
.

Sanju, with due respect, In general, economy works the other way around. 500000 house will cost you 500000 x 15 hence by creating a artificial value for the toxic assets which were super valued during the boom time any way. You will land up paying more for not only house but for every other thing in that scenario. All the people who own house will try to sell during the boom as a retirement plan. .this has actually happened in many countries.. a lot of them have then started from scratch again with fresh currencies... Example Yugoslavia http://en.wikipedia.org/wiki/Hyperinflation , Serbia in early 1990's Latest in this game is Zimbawe.. All these folks started printing currencies for exact same reason "stimulus" as US is doing today...landed up in mess.

In Zimbawe, 1 shirt cost you rediculous trillion Zimbawe Dollars. Seriously, people go around with stack of currencies to buy stuff in that country now. Remember in 80's, 1 Zimbawe $ was more than USD. Mid 80's 1USD was equal to 1 Zimbawe Dollar. now couple of eggs cost them 100 billion Zimbawe dollars.

Robert MUGABE screwed that country. Read this and follow the link for full article.

As of the 29th January 2009 all Zimbabweans are to be allowed to conduct business in any currency.
Official, black market, and OMIR exchange rates Jan 1, 2001 to Feb 2, 2009. Note the logarithmic scale.Main article: Hyperinflation in Zimbabwe On 27 November 2007, the chief statistician of the Central Statistical Office, Moffat Nyoni, announced that it would be impossible to calculate the inflation rate of the dollar any further. This was due to the lack of availability of basic goods, and subsequent lack of information from which to calculate the inflation rate; plus, most computers had an insufficient number of digits and software . The International Monetary Fund has stated that inflation is predicted to rise to 100,000% per annum.

On 14 February 2008, the Central Statistical Office announced that the inflation rate for December 2007 was 66,212.3%, and the unofficial exchange rate was Z$7.1 million to the US$1.

On 20 February 2008, the Central Statistical Office said that officially, inflation has in January 2008 gone past the 100,000% mark to 100,580.2%.

On 4 April 2008, the Financial Gazette (FinGaz) reported that officially, inflation in February 2008 jumped to 164,900.3%.

On 15 May 2008, the Zimbabwe Independent reported that officially, inflation in March 2008 jumped to 355,000%.

On 21 May 2008, SW Radio Africa reported that, according to an independent financial assessment inflation in May 2008 jumped to 1,063,572.6%. The state statistical service has said there are not enough goods in the shortage-stricken shops to calculate any new (official) figures.

On 26 June 2008, the Zimbabwe Independent reported that, latest figures from the Central Statistical Offices (CSO) showed that annual inflation rose by 7,336,000 percentage points to 9,030,000% by June 20 and was set to end the month at well above 10,500,000%.

The Sydney Morning Herald reported that inflation was likely to be two million percent in May 2008 and ten to fifteen million percent in June 2008, according to John Robertson, a respected Zimbabwean economist.[44] Robertson estimated inflation in July 2008 to be forty to fifty million percent Inflation can only be estimated because of the impossibility of following the cost of individual goods.

According to Central Statistical Office statistics, annual inflation rate rose to 231 million percent in July 2008. The month-on-month rate rose to 2,600.2%. As predicted by the textbook quantity theory of money, this hyperinflation has been caused primarily by the Reserve Bank of Zimbabwe's choice to mushroom the money supply.

Since February 2009, following a period of hyperinflation and widespread rejection of the devalued currency, companies and individuals are permitted to transact domestic business in other currencies, such as the US dollar or the South African rand. In consequence, the Zimbabwean economy has undergone dollarization and the Zimbabwean dollar has fallen out of everyday use.

100 million Zimbabwean dollarsOn 16 February 2006, the governor of the Reserve Bank of Zimbabwe, Gideon Gono, announced that the government had printed ZW$20.5 trillion in order to buy foreign currency to pay off IMF arrears. In early May 2006, Zimbabwe's government announced that they would produce another ZW$60 trillion. The additional currency was required to finance the recent 300% salary increase for soldiers and policemen and 200% increase for other civil servants. The money was not budgeted for the current fiscal year, and the government did not say where it would come from. On 29 May, Reserve Bank officials told IRIN that plans to print about ZW$60 trillion (about US$592.9 million at official rates) were briefly delayed after the government failed to secure foreign currency to buy ink and special paper for printing money.

In late August 2006, it was reported that about ZW$10 trillion old dollars (22% of the money supply) had not been exchanged for revalued dollars. These bearer cheques were demonetized. On 27 June 2007, it was announced that central bank governor Gideon Gono had been ordered by President Robert Mugabe to print an additional ZWD$1 trillion to cater for civil servants' and soldiers' salaries that were hiked by 600% and 900% respectively.

On 28 July 2007, it was reported that Mugabe has said that Zimbabwe will go on printing money if there is not enough for underfunded municipal projects. On 30 August 2007, it was reported that an additional ZW$3 trillion had been printed to pay for 500,000 scotch carts and 800,000 ox-drawn ploughs plus an unspecified number of cattle.

On 3 September 2007, it was reported that that the black market in Zimbabwe is once again booming despite price controls. People who previously were employed for a paltry US$11 (ZW$2 Million) a month are now able to turn as much as US$166 (ZW$30 Million) just through black market trading.

On 24 November 2007, it was reported that money supply was now $58 trillion revalued Zimbabwean dollars (ZWD)[54] ($41 million US at parallel rates). However, Zimbabwe banks could only account for $1 to $2 trillion of those dollars, meaning that members of the public were holding $56 to $57 trillion in cash.

On 4 January 2008, it was reported that money supply had been increased by $33 trillion (to $100 trillion) revalued Zimbabwean dollars (ZWD)[56] Further, the demonetization of the $200,000 bearer cheques was put on hold, thus increasing the money supply.

"The regime is surviving by printing money," said Martin Rupiya, professor of war and security studies at the University of Zimbabwe. "At this stage there is no other way."

According to a source at the Reserve Bank of Zimbabwe, G&D was delivering 432,000 sheets of banknotes every week to Fidelity printers in Harare, where they were stamped with the denomination. Each sheet contains 40 notes and the current production is entirely in Z$10M notes. On July 1, 2008, Giesecke & Devrient decided they would no longer print bank notes for Zimbabwe, bowing to pressure from the German government.

In the Guardian, on 18 July 2008, a report on Zimbabwe's inflation, said that an egg costs ZW$50 billion (GBP 0.17, USD 0.32), and it showed adverts for prizes of Z$100 trillion in a Zimbabwean derby and ZW$1.2 quadrillion ($1,200,000,000,000,000.00: approx. GBP 2,100; USD 4,200) in a lottery. It also showed a monthly war pension currently is ZW$109 billion (GBP 0.37, USD 0.74), shops can only cash cheques if the customer writes double the amount, because the cost will go up by the time the cheque has cleared , and people can only withdraw a maximum of ZW$100 billion from cashpoints.

24 July 2008, the Reserve Bank of Zimbabwe announced that "appropriate measures are being put in place to address the current setbacks being faced on the currency front, as well as on financial and accounting systems." It promised that in "the next few days" it would institute changes to the minimum cash withdrawal limits and IT systems' constraints. Currently, the government limits cash withdrawals to ZW$100 billion per day, which is less than the cost of a loaf of bread. IT systems cannot handle such large numbers; the automated teller machines for one major bank give a "data overflow error" and freeze customers attempt to withdraw money with so many zeros. That same day, the Institute of Commercial Management reported that ZW$1.2 trillion is worth the same as one British pound.

From January to December 2008, the money supply growth rose from 81,143 percent to 658 billion percent

http://en.wikipedia.org/wiki/Zimbabwean_dollar