I will keep this short because every time I write about economic issues on this site I am greeted by a rousing chorus of crickets.
But I wish to take a minute to say that we might be in very big trouble. I know, I know, everyone says this, long term if we continue spending we are in big trouble. Although undoubtedly true, that’s not what I am saying here. I think we might be in big trouble right now. Big trouble.
Our currency is under incredible pressure right now. Incredible pressure. While we argue over the debt ceiling, some really bad things are afoot.
First, we continue to monetize our debt. And…As your heard, the S&P has downgraded the US. No great surprise there, probably should have been done a while ago, but it puts additional pressure on us. And…
China is preparing to dump a lotta lotta dollars (2 trillion) in a effort to move away from the dollar. And…
There is continuing pressure to move away from the US Dollar as a reserve currency.
If this happens, we are dead meat. Dead meat. $5 gasoline will be the good old days.
Because of our irresponsible handling of the currency that underpins the world’s financial system, we are at the brink of having our advantage taken away. This would mean a large, possibly out of control, devaluation of our dollar and make the high prices of today look like “the good old days!”
..Special drawing rights are an international reserve asset, created by the IMF in 1969 to supplement its member countries’ official reserves. Its value is based on a basket of four key international currencies, and SDRs can be exchanged for freely usable currencies.
- Another Reuters article shows that the IMF supports replacing the U.S. dollar with their special drawing right as the world’s reserve currency.
- There is yet another article, again on Reuters, that shows a Chinese press release that states that the current five-year communist plan calls for the Chinese yuan to be a world reserve currency in 2011.
In the past few months, the Chinese have been trading with Latin America, Asian countries, Russia and settling their trades in their own currencies. That means as Russia sends oil, gas, etc. to China they are paid in yuan rather than dollars.
Two weeks ago, China also started trading with India and bypassing the use of the dollar. This creates less demand for the dollar as our supply of dollars is increasing at a very high rate and is forcing the price lower.
With all of the unrest in the Middle East, soaring oil and commodity prices (all things that make the dollar rise in value because it creates more demand) the dollar has fallen. This is a horrible sign for our future purchasing power here in the U.S.
We are having our attention diverted from this monstrous issue. In the next few months this could be THE issue that can change our way of life.
Change our way of life is right. If we lose this advantage, we are toast people. Toast. Our currency becomes worthless. Toast, I say. And I don’t see how we can avoid it.
April 25, 2011 at 3:37 am
That's scary. I can't even comprehend the effects of this as it's beyond my understanding but it's scary. The $5/gallon gas prices scare me as it is.
April 25, 2011 at 3:50 am
I've been saying this for almost two years – not because I'm smart (I'm way not smart), but because I can see the math doesn't work. We are headed for a fall and my advice is to stock up.
April 25, 2011 at 3:58 am
Exactly. stock upon things like flour, butter, sugar,rice,beans,things that can be turned into meals or bread, not meals or bread. If you stock up on prepared foods, you are wasting space. Stock upon the foods you would need to prepare the foods. And plant a garden. Then buy a chicken and a rooster, and a cow if you can. Get ready. The hard times are coming.
April 25, 2011 at 4:17 am
Stocking up is one thing, but finding local means of providing for your community is better. We've gotten away from the old time general store, the local you knew who could fix a bike, repair a leaky pipe, do a bit of carpentry, farm, preserve food, etc. That's an America we need to recapture and quick.
http://www.thenewatlantis.com/publications/shop-class-as-soulcraft
This should become our manifesto…
April 25, 2011 at 4:48 am
The point should be made that the dollar, as a global legal tender, gives us the right to issue currency to buy most anywhere in the global economy the goods, services, and/or assets we need to keep our economy functioning effectively. I have often question why a national currency should be used as a global currency! Certainly we get an advantage but it is an unfair advantage.
Most commodities are traded in dollars, thus nations have to sell stuff in dollars in order to get the dollars needed to buy the commodities they need to keep their economy functioning effectively. All we have to do is issue more dollars to buy our oil, iron, whatever.
Instead of complaining about the loose of our unfair advantage we should be thinking about reinventing the global currency system so it is fair to all global participants.
April 25, 2011 at 6:25 am
"Instead of complaining about the loose of our unfair advantage we should be thinking about reinventing the global currency system so it is fair to all global participants."
That whooshing sound you just heard was of a point being missed.
April 25, 2011 at 12:26 pm
That is indeed problematic.
But it gets worse for us Christians and Jews.
http://divine-ripples.blogspot.com/2011/04/obama-plans-to-legalize-50-million.html
April 25, 2011 at 2:35 pm
In all honesty, having the US dollar as a global reserve currency only makes sense if the US was fiscally and monetarily responsible. We haven't been and show no signs of becoming so. The rest of the world has caught on and has no interest in throwing in with an under-educated, over-pampered country of airheads who can't figure out how to balance a checkbook. We have become the Paris Hilton of international power and finance.
April 25, 2011 at 3:02 pm
Suggestions: transfer your investments to commodities e.g. gold & silver to retain it's value. Then hide your assets where the government cannot get to them. You may be able to keep the value but you won't stop the government from controlling your access – when push comes to shove. More here or http://divine-ripples.blogspot.com/2011/04/5-ways-us-bankruptcy-will-affect-you.html
April 25, 2011 at 3:18 pm
One big thing to do is elect leaders who will stop spending so much money on entitlements and pork barrel projects and other ridiculous wastes of our money. Maybe NOW people will get it.
April 25, 2011 at 3:39 pm
Stocking up is okay but if things really hit the fan don't be surprised if your relatives and the neighbors stake a claim on that food.
April 25, 2011 at 4:07 pm
Let's not get all apocalyptic, everybody. There are going to be some hard times ahead. Patrick, you are right. The currency is under attack. The Chinese want to become the global players so they can control things. This is very similar to what happened in the last 2 years of the Carter administration. He thought it was fair, too, for other global participants. The main reason things are not fair is because the world never was and never will be fair.
We still have a large country. Prices will go up. Gas will be very expensive. The question is, will we get leadership that is honest, able to lead from a moral foundation and do the right things? Will people respond responsibly? Will there be a moral rebirth in this country? Don't throw in the towel yet. God has plans for each of us and for our country, as a result.
BTW, Anon, if you don't like the way things are run on the global market, you really won't like the Chinese. There are 2 Catholic bishops who have been in prison for years who are completely disappeared. That's how they deal with problems.
April 25, 2011 at 4:31 pm
I'm not so sure China will be a replacement for our currency. For a decade they've bought our T-Bills, and borrowed against them and went on an infrastructure building binge. The CHICOMs are literally building ghost towns, power stations that will not go online, and bridges to nowhere. No one really knows the depths of thier prolifigacy, but Goldman Sachs sold off its shares in one of their state run banks. Inflation in real estate and food is almost out of control there.
And Europe isn't much better. Like the US, the EU is overleveraged, and faces an almost impossible taks of keeping entitlements alive in an ever aging society.
What we do have, thanks in large part to China, the US, and the EU is a historical bout of global inflation. Bernecke and the Fed it appears have finally woke up to the monster they created. QE looks to be coming to a close this summer. And interest rate increases will probably be the mechanism soak up all of that excess liquidity. The question is timing. The Fed Chairman is a political animal. And he will be under great pressure from both Congress and the Whitehouse to keep the Gravy Train going for another 12 months in order to keep many politicians employed. For when the rates go up, the the stock market and commodity bubbles will surely pop. And the double dip recession many fear will come to pass. The only good news will be plunging prices in energy and food. Of course, that will not matter if you don't have a job.
April 25, 2011 at 5:37 pm
@Anon & @Anneg: Elections will not kick Obama out because not only will he make new supporters from illegal Latinos, he will bring in Muslim refugees from the Middle East and Africa for "humanitarian reasons". Click
here or go to http://divine-ripples.blogspot.com/2011/04/obama-plans-to-legalize-50-million.html
April 26, 2011 at 10:23 am
@ Shaun: Right on man. It seams to me that suburban living has killed the ability to care for oneself.
Hubby and I live in a rural area and own a manufacturing company and the ability to fix our equipment is vital, but overall the ability to make things work, from plumbing to furnaces, cars, etc. has been compromised.
In a semi EOTWAWKI situation, the ability to take care of our needs locally will be key.
April 26, 2011 at 2:21 pm
I wonder if God is trying to wake us ALL up as to the REAL root of the problem?
KM
April 26, 2011 at 3:28 pm
For those planning to plant their own food, cfr. HR 875 and SR 425 – Government control of your garden.
April 26, 2011 at 11:33 pm
Oh, you're totally right. We haven't seen anything yet! Our problems are just beginning. We still have a chance of recovering, if we make some drastic changes, one of which is getting Obama out of office. If we have to endure 4 more years of his policies, we're DONE.
April 27, 2011 at 3:51 am
Worse yet is the fact that we have a President that isn't even a U.S. citizen. I think we need to resolve the birth certificate issue before we start worrying about trivial things like the economy.