| apr 28 2007 | | Dollars’ demise. | As the dollar slip past 82 and heads towards the critical 80 mark. It would look as though all the ducks are in a row for the collapse of the dollar, the US economy and possibly the Country as many have speculated. I believe this could be the eventual outcome played out over a number of years but if the Japanese experience is to be a guide it may not be as a sudden event as has been predicted. Even the Weimar experience might be off mark. (no pun intended)
That 80 is a multi-decade level which when breached means all bets are off, is not in dispute. However, it would be naïve to think plans are not in place to attempt a bail-out or mitigate the effects that follow. The Plunge Protection Team would be calling in markers and using all the Treasury power to ensure an orderly market. So how may this play out?
Firstly remember that Helicopter Ben would turn the printing presses on to maximum output. That is official Fed policy. Secondly, the worlds Central Bankers would buy dollars sell gold and do anything to support the dollar of which they hold so many. They don’t want to see the value of their reserves go to zero. Thirdly, the oil producers who have sold their souls to the Administration in return for an army that will respond and put down any uprising by the people against these despotic unelected rulers and kings would buy dollars and maybe lower the price of oil on the preferred market. Americas own protection racket.
Do not under estimate the power of the PPT to influence markets. Their tentacles reach deep into the worlds markets using proxy servants to do their bidding. Bankers rule the world back by the rule of force. Might is right is their mantra.
Another question is what would the traders do? Like the Sterling crises of 1992 when on Black Monday George Soros broke the Bank of England, once the traders get a whiff of a gift that a currency is a one way bet, they pile in, making billions and forces the target currency to hike interest rates in a defensive knee-jerk reaction. Bear in mind hedge funds that involve themselves are wide open to attack by the PPT as their life resolves around naked shorting, which have already had minor examples of the outcome when a trade goes wrong.
Then there is war. War creates economic expansion which could be used to delay the inevitable. War can be used to expropriate limited resources. War is always good business, even more so if you can supply both sides.
I like gold. Gold doesn’t pay interest. It is not prone to substitution. It is limited in supply and a declining production like oil. It has over thousands of years watched paper currencies come and go and emerged as the ultimate store of wealth. Fluctuations happen over the short term but long term is has performed as the immutable element. When the storm breaks gold will be hit like all financials as cash is required to pay margin and settle obligations. Then when people realize there has been a seismic change and everything they have relied upon as permanent has burnt off like a morning mist there will be a stampede into gold and other precious metals and economies will have to be rethought. American Eagle, Krugerrand, Sovereign, Maple Leaf, Panda, just some of the gold coins that would glister in any collection. These coins may have doubled in value recently but are still cheap by any standard. Imagine a gold price $2300 sound crazy? It is what gold should be now just allowing for inflation since the 1970’s.
| | Respond... |
|
|
 |
|
