Skip to comments.Fleeing the Dollar Flood. The World tries to protect itself from a devaluing US Currency.
Posted on 04/21/2011 6:34:18 AM PDT by SeekAndFind
Members of the International Monetary Fund emerged from their huddle in Washington last weekend resolved to keep every option open to slow the flood of dollars pouring into their countries, including capital controls. That's a dangerous game, given the need for investment to drive economic development. But it's also increasingly typical of the world's reaction to America's mismanagement of the dollar and its eroding financial leadership.
The dollar is the world's reserve currency, and as such the Federal Reserve is the closest thing we have to a global central bank. Yet for at least a decade, and especially since late 2008, the Fed has operated as if its only concern is the U.S. domestic economy.
The Fed's relentlessly easy monetary policy combined with Congress's reckless spending have driven investors out of the United States and into Asia, South America and elsewhere in search of higher returns and more sustainable growth. The IMF estimates that between the third quarter of 2009 and second quarter of 2010, Turkey saw a 6.9% inflow in capital as a percentage of GDP, South Africa 6.6%, Thailand 5%, and so on.
This incoming wall of money puts the central bankers in these countries in a bind. If they do nothing, the result can be asset bubbles and inflation. Brazil (6.3%) and China (5.4% officially but no doubt higher in fact) are both enduring bursts of inflation, as are many other countries. These nations can raise interest rates or let their own currencies appreciate, at the risk of slower economic growth. Rather than endure that adjustment, many countries are resorting to capital controls and other administrative measures to try to stop the inflow
(Excerpt) Read more at online.wsj.com ...
These debt ceiling mongers act like it was an act of God how our economy got in the shape its in. The debt and deficit got this way due to financial mismanagement by congress and the policies of the nanny state.
Has anyone gone to jail yet over this? - Didn't think so.
It’s going to be very hard to reign in. So many people are on the gov’t dole and nobody wants “their” share reduced. From seniors to those taking tax credits (legitimate but making the income tax very heavy for those who don’t qualify.)
I talked to some of my conservative friends around tax time. There are so many credits now that they get huge refunds on their taxes, even though they’re making what seems like to me “decent” wages. They actually get back more than they paid in.
We pay through the nose because no mortgage, no kids at home, etc. When did they start these credits, LOL, somehow we missed out.
Even here in Florida when Scott tried to cutback a dept that was way over budget, he was jeered by conservatives I know because the cuts were in the area of disabled adults. So he rescinded, which was a bad move, IMO.
If nobody is willing to have their “piece of the pie” cut down, I don’t see how we’re going to get anywhere.
CRB Index for the last 6 months.. (Future Freepers Sorry, this is a snapshot URL) this post won't make sense a month after the current date.)
This exactly matches the chart presented by Russ Winter at Minyanville.
The last 40 years have nothing to do with the current situation because folks had the good sense to go Ape Sh%$t when Nixon gave up the Gold Standard. What they are doing now.. the BASELESS STANDARD, the NOT EVEN GREEN ANYMORE.. standard.. heck.. it isn't even paper. Just electrons representing lies that our children have to make real by living in bondage.
If the Debt Ceiling is increased, the Fed will do QE3 to keep Treasury auctions from failing. Something immediate and substantial needs to be done, and Congress just punted.
Some say, "If interest rates on Treasuries skyrocket then everyone, including China and Saudi will jump back into dollars with wild abandon." But, more likely, there will be no takers for $100 Billion per month.. but the interest rates may rise anyway.. rather... it is much more likely that QE3 occurs for the same reasons as QE2 but the situation is more desperate.
The problem with that.. is that the US is deep into short term borrowing which means that the Deficit will balloon insanely the minute interest rates begin to rise..
You get into a trap, there is no interest rate high enough that overcomes the real likelihood of loss of the original principle. Equity works because it based on the analysis of the risk vs reward of appreciation or loss of the capital investment. Bond work on the assurance that the capital invested is safe, over a certain level of risk, they are considered junk because they are inherently not safe.
What foreign companies will do is use the fake dollars we have given them to purchase real US assets leaving us in an inflationary spiral and vassals in our own land. They will at some point soon, months, insist that all of our borrowing be done in their currency rather than ours and this is when our goose is cooked.
This is a story as old as Joseph, the Pharaoh and the 7 years of famine. It ended with all of Egypt in Slavery including the Israelites whom only God could save.
What is sick is that Beck warned of this 6 months ago and we just couldn't see it back then.. but now it is obvious.. and yet we are not doing anything to stop it.
There comes a point in every PONZIE scheme where the new members cannot sustain the deal and it all comes tumbling down. Social Security is the Ponzie scheme and we all know it. It has failed we are selling our very lives and putting our children into the fire of slavery and death and oppression. This has to end worse than Greece and Obama and crowd know it and are cheering with the torches in their hands. This is the Clovin-Pevin crisis they have been working for, but we don't have to go there willingly.
In case you have any doubt in your heart..
Chart h/t Doug Ross
Goodbye, AmeriCorps. Hello, FoodStampCorps.
By Michelle Malkin April 15, 2011 10:14 AM
So much for the new era of fiscal responsibility. The federal governments dependency drones have been spared the chopping block. After vowing to eliminate funding for President Obamas bloated $6 billion AmeriCorps social justice army, House Republicans retreated and will shrink the AmeriCorps budget by a minuscule 6.7 percent.
Yes, across the Internet, the feds are recruiting AmeriCorps VISTA (Volunteers in Service to America) workers to apply for jobs as publicists for the welfare state. Their mission: to sign up as many people to federal food stamp rolls as possible. Because, you know, the record-breaking 12 million that have been added since Obama took office is apparently not good enough.
These people are serious and using Cloward-Piven like a Bible and they are on a mission.
First and foremost, people have been lied to and they are not ready for dealing with the reality of this. Beck and Palin see Trump's big mouth as a distraction but people are sick of lies. I am.
It starts here first. We quit lying to ourselves. I saw the charts that I posted here this weekend and they made me sick. The guy at www.endofamerica93.com has seen this for a while.. and unfortunately decided to make this a sales pitch with a 20 minute clouded presentation at the beginning.
The crisis doesn't come from "Bankruptcy" as Hannity keeps saying.. but the loss of "Reserve Currency Status" and the meetings are going on around the world to get this accomplished. I am sure they would like to do this without destroying the value of the dollars they already have.. but QE3 will destroy this value anyway.. so after June 2011, a crisis is assured soon no matter what if the DEBT CEILING IS INCREASED without substantial immediate and draconian cutting and a mechanism to absolutely end the deficit borrowing in 24 months.
Go outside, look around, do we love this country? If we do, we have only about 2 months to do something.
That's why I keep saying that the debt will be inflated/hyper-inflated away. No politician will be able to make and/or sustain meaningful cuts. That's why gold and silver prices are zooming...others think the same.
“.....we have only about 2 months to do something”.
How do you see it happening? The powers that be must be near panic mode right now.
Witness S&P offering to downgrade US Treasuries in spite of strong arming done by the Administration.
The problem in a nutshell is the two graphs I posted. On one side, Commodities have shown 45% inflation in the past 6 months mirroring the Fed's issuance of dollars for Treasury Securities. This is arcane stuff. What is happening is that the Fed is saying, US Government you can spend a hundred billion per month and we will buy these securities that you are issuing. So the US government makes an entry in a ledger, (I owe you 1 trillion dollars) and the Fed says ok. Go and spend that. And the government prints up checks and sends them, which the banks honor, and everyone is happy, except that this trillion dollars is now floating around between bank accounts looking for real goods and services to buy.
Because, the Fed is the party who is the lender, the Fed simply says, here is the money, no one is going and saying.. I need money, please loan it too me and I will pay you interest.
This is why when inflation is going nuts, short term interest rates are still at 2.9%. Because the Fed is doing this for any bank that shows up just the same.
Unfortunately, there is a price to pay.. and that is inflation. anything over 50% inflation per year is called hyper-inflation and that is exactly what has already been dialed into our economy, but the chart I show is a futures price. These contracts for goods and services are put 6 months out.. so as these futures expire, the goods and services built on these pricing have to go up in price as the cost goes up or the profits of any company selling them disappears. This takes time. The first of wave is striking this month, but like the Tsunami that hit Japan, it is a wave that just keeps coming and building in power and it sweeps away all in its face.
However, once the government starts just printing money to pay its bills its hard to stop. Because, once you destroy the value of your money and show that you are willing to pay off your debts with "fake" dollars all dollars are damaged because the Fed can't be indicted for counterfeiting. These are real dollars but the net effect is the same as having someone doing this.. The money supply increases with no real goods and services to support this increase in available dollars and it causes inflation.
They have this ability because the Fed is charged with balancing the number of dollars available and the amount of goods and services available in such a way that the economy can grow without inflation. As the amount of goods and services available increases on the aggregate, the amount of money to purchase these must grow as well or a recession occurs. Too few dollars for the amount of goods and services available causes "deflation" as dollars become scarce. The problem with the gold standard is that the economy is tied the amount of gold mined each year, a bizarre way of managing an economy.
The current system has more or less worked until now, because Bernanke broke the rules to allow the US Government to spend beyond its ability to borrow to support the Stimulus spending, TARP and what not. Now, if the Congress allows the Debt Ceiling to be increased sufficiently to fund the planned borrowing, the next step in the march to INSANITY is QE3 for all of the same reasons QE2 was necessary, but worse because no one wants Treasury securities now as they are waste paper potentially in just a few months. If 50% inflation really hits over the next six months, a $1000 bond with a zero % interest rate (a mythical security only bond) will fall in value to $666. Appropriate. Huh. $1000/1500 * 1000 = $666. Not trash, but not what you expect from a security. This is the problem.
July 1 looms large and the Congress just doesn't get this. They can't handle the fact that someone hasn't proven where he was born, so they have limited ability. Its hard to comprehend why others are not screaming full throated, but one university in Texas has converted 1 Billion into Gold Bouillon, and so have all of the fat cat rich people. It is just the suckers, I mean voters who are kept in the dark for our "own protection."
Ping for later sob inducement. This is very, very scary stuff...
What if Obama inflated the US dollar by lowering the S&P rating on purpose? complicit?
This brings us back to jimmy carter without a reagan in sight.
Thank you very much, dalight.
You have it down very well. Are we going into a depression or hyper inflation?
It would appear that the answer is yes, both. Though that is an odd mix, we have seen this before in the Carter years. We called it stag-flation.
Normally, Hyperinflation is demand pull. Excess demand bids up prices for available resources and this is being pushed in the background of a persistent recession caused by over-regulation and uncertainty and a projection of a negative tax environment in the future. This negative future projection and poor market has prevented suppliers from passing on cost increased but has led to price increased by making the "packaging/portioning" smaller. At some point though, prices must be increased or the underlying businesses fail. The government support of people who lose their jobs keeps people from lowering the cost of labor, so the net effect is the loss of jobs and the increase of dependency on the government as long as it can intervene.
When this breaks down, there are fewer businesses, no jobs and no possibility even if regulation and taxes are no longer relevant because the government is unable to collect them because the businesses have already been destroyed. So, you go for riots in the streets. This is called Cloward-Piven and it has been the central guiding plan of the radical left for the last 50 years.
The left plans to take down the US and its pesky freedom without firing a shot until after they have power. Of course then, they will be happy to shoot anyone, by the million.
Yes, I have been sick about it for a week. Beck for all of his insanity had this right on the nose almost a year ago and it just defied the rational mind how this could happen until the Federal Reserve turned against the very purpose it has served since its founding, defending the value of US Treasury bonds.
With the introduction of TARP it became an engine to accumulate power in Washington by fiat. It was the lever used to force banks to be consolidated, force the destruction of GM and Chrysler, and so much more. But, on the Government side, they were attempting to lock up the Health Care and Energy sectors using law and regulation and in this they only partially succeeded by passing ObamaCare.
But, there is hope. S&P sounded a shot though it was mild compared to the real jeopardy and the situation is slowly propagating into the conscience of Americans. People weren't ready for strong action even weeks ago, and the Government is going all out to keep the true situation from being reported because their plans can be thwarted by simply banning the Fed from any further "Quantitative easing." If the government must really borrow the money it needs to continue spending, Interest rates will go through the roof, worsening our short term situation but the Dollar's value and ultimately our freedom and economy will be maintained. We get pain now though, but not riots in the streets.
If the Congress begins immediate and drastic cutting in places where there is a real opportunity, ie move the retirement eligibility age from 65 to 68 immediately, this would immediately and significantly cut the increase of cash outflows with the most minimal real pain available as this just prevents the action of more people becoming dependent who are otherwise productive. Revenue is increased, Cost is increased and folks get the signal that Social Security isn't going to be there sooner rather than later.. and begin to make alternate plans and investments.
This seriously sucks but this is the best way to unwind this ponzie scheme. Or we can wait for it to absolutely break and take the whole economy down.
It goes without saying, the Libya adventure gets cut, it is stupid and wasteful and counter-productive and most probably illegal.
And, the US has to commit to Drill Baby Drill with furious abandon. All Oil recovery should be placed into a program like ACES in Alaska and this revenue should be split by the states and Federal Government. And Congress needs to deregulate and unwind the worst of the Green Movement excesses, but also look at all of the previous insane "reforms" to lighten the load without removing cost effective and beneficial regulations, but if this cannot be done because of fighting then Reagan's tactic of wholesale deregulation should be applied. All government regulations should be subject to a post implementation review on a 5 year basis for adverse consequences and the Congress should need to re-authorize the regulation and any plans to correct and reduce these problems.
We should learn the concept of continuous improvement in regulation and a reporting of the pro's and con's and the hearings and re-authorization would serve as a check to the unchecked rise of bureaucratic power that has been created by the ever growing bulk of regulation.
But, for now, it comes down to making it illegal for the Fed to simple print money. This is the first and hardest step.
Damn. Thanks for your reply.